Does the thought of retiring make you nervous or excited? If you have a strong income plan, retirement can be one of the most exciting and moments of your life. You can retire with the knowledge that you will be able to continue living your life the way you want to live it. If you don’t start income planning, however, retirement can be downright scary.
Developing an income plan for retirement starts with understanding the different income streams available to retirees. You’ll have to get familiar with terms like indexed annuities, guaranteed income, and many more financial terms that can serve you well when you’re done working. The better you understand your options for retirement income, the easier it will be to plan for your future.
In the article below, you can learn all about the different options available to you in terms of retirement income. You’ll also learn how to start saving now so that you’ll be set up for a long, relaxing retirement. Read on to make sure you’re ready to retire comfortably when the time comes.
What are Indexed Annuities?
One of the best ways to ensure you’ll have a comfortable life as a retiree is to purchase an indexed annuity as soon as possible. This is a contract between you and an annuity provider that works similarly to insurance.
You’ll give the provider a one-time payment, monthly payments, or annual payments in exchange for a contract that promises to provide you with regular payments when you reach retirement age.
With indexed annuities, the amount of these retirement payments depends on the performance of certain index funds. The S&P 500 and Wilshire 5000 Total Market Index are good examples of the types of index funds that are generally used for indexed annuities to provide guaranteed income.
Purchasing an indexed annuity contract now will set you up for regular income to use when you’re retired.
How Can You Get Access to Tax-Free Income?
The taxes that you pay while you’re working can take a lot of money out of every paycheck. That’s why many people want to know how to avoid paying taxes on the income they get when they’re retired. One option for tax-free income is a Roth IRA.
If you start contributing to a Roth IRA when you’re young, you’ll have plenty of time to let the money grow as the IRA investments increase in value. No matter how much your Roth IRA grows as a result of investments, the extra money in the account won’t be taxed.
Plus, you can take the money out of the Roth IRA when you do retire and it won’t be taxed then either. The only time this money is taxed is when you first receive it as income; before you ever put it into a Roth IRA. You’ll also have to pay taxes on this money if you pull it out of the Roth IRA before you reach retirement age.
How Do Social Security Payments Work?
For however long you’ve been working in the United States, you’ve been giving part of your paycheck to Social Security. When you retire, you can finally get some of that money back in the form of social security payments. How much you get paid from social security depends on how much you made during your life and what age you are when you retire.
If you’re planning to rely heavily on Social Security in retirement, you should know your full retirement age. You can click here to see when you’re eligible for full social security payments.
If you choose to retire at age 62 and you have not yet reached your full retirement age, you will not receive your full social security payments each month. However, if you choose to delay your retirement by a few years, you can actually receive a larger social security check each month than you would have if you’d retired at your full retirement age.
When Should You Start Planning for Retirement?
When it comes to financial planning for retirement, you should start as early in life as possible. However, it’s never too late to start looking at your options for retirement income. If you do a little bit of income planning today, you can rest easy in the future knowing that you’ve already taken care of your retirement income streams.
Why is it important to start saving for retirement early on in life? It’s important because of compound interest. As your money grows in a retirement account, the previous year’s gains of the previous year can grow on top of the money you initially put in the account. The more years you have between your initial savings deposit and your retirement date, the more compound interest will impact your account.
Start Income Planning Today and Enjoy Your Retirement
The more you plan for retirement today, the easier it will be to relax when the day comes that you finally do retire. People who do a lot of income planning before retirement can also retire earlier than people who don’t.
Instead of having to work longer and save more for retirement, people who are smart about income planning can stop working once they reach retirement age. If you’re interested in learning more about income planning and retirement, get in touch with our retirement planning experts.