Consumer Tip of the Week

 Retirement

 It is true that retirement planning often gets diverted when you are knee deep in life expenses. So many people picture it like a permanent vacation, but in reality, many people do not plan well enough to make ends meet. This week we are suggesting that you add one more task to your financial spring-cleaning list—envision your retirement.

Before you get overwhelmed with all the details of retirement planning, start first with picturing what you want your retirement years to look like. Make a list of things that will be important to you. Will you downsize your home? Has your mortgage been paid off? Do you plan to travel? Will you have debt?

Here are some great tips from “My Retirement Paycheck” on areas you should consider:

DEBT: To maintain a predictable cash flow in your retirement years, make every effort to pay off your consumer and credit card debt before you retire, and don’t borrow money during retirement unless you know precisely how you’ll pay it back. Consider the 10 years before retirement as your “debt-reduction” decade.

HOME & MORTGAGE: A house may be your biggest asset, but be careful about viewing the value of your house as if it were your retirement plan—you still have to live somewhere.  Housing prices fluctuate and you need other forms of savings. It’s best to plan that a home’s equity is one of the last assets you use in retirement.

INSURANCE: Your retirement spending plan is not complete until you know how you will pay for medical and long-term care needs. Insurance companies also sell many forms of annuities. Putting at least part of your retirement savings into an immediate fixed annuity that will give you a monthly payment for the rest of your life creates a regular source of income.

SOCIAL SECURITY: Use your pension as a bridge to social security. By delaying taking Social Security, you will receive a larger Social Security benefit.  Unlike most pensions, Social Security is indexed for inflation so you’ll have more purchasing power in future years. If you can wait until 70 to take out Social Security, your payment will be at least 75 percent higher than if you started taking benefits at 62.

Start small with considering these topics. Before you think about where you should be investing your money for the future, think about how you want your future to look.

Additional Resources  

Visualize Retirement: Wall Street Journal Smart Money interactive retirement planning guide

Retirement Estimator: An estimator based on your actual Social Security earnings record

SmartAboutMoney: Impact calculator for borrowing from your retirement plan 

For more information, please visit the Consumer section of www.montanalawhelp.org/.  Or, call the Montana Legal Services Association Helpline at 1-800-666-6899.

This Consumer Tip and MontanaLawHelp.org is a joint project of Montana's Credit Unions and Montana Legal Services Association.  MontanaLawHelp.org has information about consumer issues, housing, money management, and more.