A MAN who plans to retire soon with US$1.5 million has discovered an important step to avoid running out of money.
Not having children can significantly alter retirement plans, as financial guru Ari Taublieb has pointed out.
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Ari is a Certified Financial Planner (CFP) and Vice President of Root, a retirement planning firm.
In a recent YouTube videohe analyzed the situation of his client Tim, a 57-year-old man who earned $250,000 a year but expected to retire soon.
Tim had $1.5 million between his brokerage and a WILL$50,000 in savings and a $450,000 house in Colorado with a mortgage.
It is important to note that he had no children, so he was not worried about leaving an inheritance.
“You should plan your retirement very differently if you are single, even if you are married but have no children,” the financial expert said.
Tim didn’t hate his job, but he was interested in retiring sooner rather than later.
However, he would not be able to access his IRA savings until age 59½ without paying a penalty.
If he were to retire now, it could mean running out of money as he slowly eats into his nest egg over the decades.
EXPERT SOLUTION
Luckily, Ari had a recommendation.
“Is there perhaps a position you could hold that would bring you some income?” he asked.
This new job would not need to generate as much money as Tim’s current role, but rather help bridge the gap until retirement.
Ari proposed that he find a job that paid $50,000 a year but with less time commitment and stress.
While this salary wouldn’t entirely fund Tim’s lifestyle, it would be $50,000 less per year than he would need to withdraw from his brokerage or IRA.
Where to save retirement money
There are several different places you can put the money you have saved for retirement. Each has different tax advantages, but not all are available to everyone.
401(k) – an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made after taxes, but withdrawals in retirement are not taxed.
TSP (Thrift Savings Plan) – a retirement savings and investment plan for federal employees and members of the uniformed services. They work similarly to 401(k)s, but may have more limited investment options.
Pension – an employee benefit that obliges the employer to make payments to the employee upon retirement. Pensions are becoming increasingly rare.
This would mean that the money in these accounts could continue to grow thanks to compound interest.
If Tim did this for five years, from age 57 to 62, it would have a big impact on his retirement prospects.
‘YOU DECIDE’
“Before he was going to run out and now he has $1,000,000,” Ari said.
The counselor added that those who intend to retire soon have multiple options to consider.
‘You can work more, you can spend less, it’s up to you.’
See what another financial expert advised for a 70-year-old with no retirement savings.
And learn 13 important facts about Social Security that can prevent you from making “tragic mistakes.”
This story originally appeared on The-sun.com read the full story
