Iowa Retirement Planning

Every Iowa Retirement Plan Should Include These Four Steps

Retirement planning is now no longer just about your financial future. To have a more comfortable, secure—and fun—retirement, you need to build the financial cushion that will fund it all; for you, your spouse, and your family. 

When it comes to retirement planning, you want to help ensure your financial safety for you and your loved ones. Nowadays, there’s so many changes happening it’s hard to keep up; Inflation, increase in taxes, and a volatile stock market can make you feel uneasy about your golden years.

Retirement planning starts with thinking about your retirement goals and how long you have to meet them. Then you need to look at the types of retirement accounts that can help you raise the money to fund your future. As you save that money, strategizing your investments could help it grow.

To make sure you’re ready for what the future holds, here are 4 steps that every Iowan should include in their retirement plan.

1. Try to Maximize your Social Security Income

To try and maximize Social Security benefits for you and your spouse, you need to know which of the many separate claiming strategies for married couples is right for you. Sometimes, it makes sense to start taking Social Security while letting your nest egg grow. For others, it makes sense to draw down on investments to let your Social Security benefits continue to grow until full retirement age – or to when the benefit amount peaks before claiming the benefits.

The SSA calculates your benefit amount based on your earnings, so the more you earn, the higher your benefit amount will be. Some pre-retirees look for ways to increase their income, such as taking on part-time work or generating business income. Others, however, unaware of the impact on benefits, may scale back on their work or semi-retire, which can lower their Social Security income. 

It’s important to note if you and your spouse were born before Jan. 2, 1954, and have both reached full retirement age, you can claim spousal benefits and let your own benefits keep growing. Then, when you reach age 70, you can switch to your higher benefit. One caution: You can’t claim your own benefit if you want to make use of this “restricted application”.

2. Create a Retirement Income Plan

Investing should be easy – just buy low and sell high – but most of us have trouble following that simple advice. There are principles and strategies that may help enable you to put together an investment portfolio that reflects your risk tolerance, time horizon, and goals. Understanding these principles and strategies can help you avoid some of the pitfalls that snare some investors.

When you are working, investing can be fairly straightforward. All your money has to do is grow. When you retire, your money has to provide income, pay taxes, and grow in order to support your lifestyle. Investing becomes much more challenging once you start taking income.

Ask yourself whether your projected income will cover your expenses and the kind of lifestyle you desire. Start by creating a list of fixed sources for retirement income. Add columns for each source of fixed income such as:

  • Your Social Security/Your Spouse’s Social Security
  • Pensions for both spouses
  • Annuity Income
  • Earnings and other streams of income
  • Expenses including taxes

This will help you spot where you need to make changes in order to help maximize your income. Remember, a common rule of thumb is that in retirement, most people need to replace roughly 60% to 80% of their pre-tax, pre-retirement income in order to maintain their lifestyle.

3. Forecast your Medical Expenses

Healthcare continues to be one of the largest expenses in retirement. In 2021, the average retired couple age 65 needed approximately $300,000 saved (after tax) to cover healthcare expenses alone in retirement. One way to help prepare is to enroll in a health savings account (HSA), which some employers offer. 

If you’re still working and your employer offers an HSA-eligible health plan, consider enrolling and contributing to a health savings account (HSA). An HSA can help you save tax-efficiently for healthcare costs in retirement. You could help save pre-tax dollars (and possibly collect employer contributions), which have the potential to grow and be withdrawn tax-free for federal and state tax purposes if used for qualified medical expenses.

Medicare expenses and supplemental out of pocket costs can vary, but there are ways to get an estimate for your retirement plan. Don’t forget to factor in your age, current health and long-term care should you need it further down the road.

4. Stay Up to Date on Estate Planning

Estate planning is another key step in a well-rounded retirement plan. Life insurance is also an important part of an estate plan and the retirement planning process.

Having both a proper estate plan and life insurance coverage helps ensure that your assets are distributed in a manner of your choosing and that your loved ones will not experience financial hardship following your death. What’s more, an effective estate strategy can spell out your healthcare wishes and help ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.

Working with an Iowa-based Fiduciary can assist in helping prepare and maintain this aspect of your overall financial plan.

Final Thoughts

These are just some of the many key factors you should include in your retirement plan to help set you up for financial success.

Ready to start planning for retirement? Where will your retirement money come from? At Johnson Wealth Income Management, our goal is to help you prepare for retirement.  If you’re like most people, qualified retirement plans, Social Security, and personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement income sources.

Our team of financial advisors are here to help you every step of the way. For more information about retirement planning or to set up a consultation for retirement, contact us here today.

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