Speed Bumps on your Retirement Journey

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Speed Bumps on your Retirement Journey

talessi@ariesfoundation.org

There are plenty of potholes to avoid along your way...

Once you have your figures & numbers firmed up, and you've poltted out a course for whn you will be retiring. The next step is to make sure that you will stay on course. And just like when you are planning any other type of trip you need to be aware of any hazards that lie ahead that could stall your progress or send you off the road entirely.

What are those potentail pitfalls?

Social Security Claiming for one: For most pre-retirees the Full Retirement Age (FRA) for social security is 67. If you claim before FRA then you will receive a reduced benefit. Claim before you are finished working and your benefits are subject to a possible reduction penalty.

Medicare: Available at age 65, but what if you plan or are forced to retire early? Then you must obtain your own health insurance coverage until you become eligible for Medicare. once you are eligible the premium for Part B is deducted from your Social Security benefits.

Taxes:All the money you saved in your retirement accounts to generate income in your retirement years is now taxable, and if you are not careful, this can be a painful lesson to learn. The IRS views the funds being withdrawn from a 401(k) or IRA as income since it is taxed. Since it is income then Social Security will also view it as income as well, and if you more icnome then allowed then the government will tax your Social Security benefits. At least 50% of it, but it could be as much as 85%!

A Triple Whammy!

So the money in your retirement gets taxed. OK, I'm onboard since I knew it was a pre-tax contribution, but now you're telling me that 85% of my Social Security could be taxed as well? But wait, it actually gets worse, because now that becomes income too adn then they will stack on capital gains, even earnings from Municipal Bonds (not totally tax-free) and if that crosses a certain threshold then you get hit with a Medicare Premium Increase. Phew! And if some of that income needs to be replaced? Where is it coming from? You guessed it - the retirement account and now I have more taxable income which could then push me into an even higher tax bracket, which in turn could take away more of my principal that I was counting on to last the rest of my life!

The Pothole Everyone Ignores

Assited or Skilled Nursing Care: The latest statistics show that 70% of the people over the age of 65 will need some kind of assisted care. And a portion of that population will need significant support and some of those will last for more than five (5) years. Don't dismiss these stats. This needs to be addressed as part of your plan otherwise you could be headed for disaster.

Tomorrow: What's In Your Buckets?

Rules that need to be followed for money in retirement. How to think about your funds and be prepared for any hazards that may lay on the road ahead.

Got Questions. Ask Us. We Can Help With That. We are the ARIES Foudnation for FInancial Education, Inc a nonprofit dedicated to trying to help everyone have a better realtionship with their money.

www.ariesfoundation.org

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