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Tips for Retiring Well
The average 60-year-old can expect to live into his or her 80s. If you’re in good health during your 60s, you’re likely to live even longer. The following are tips from UI Extension’s You Can Retire Well workshops:
Brain help Research indicates that older adults can maintain mental acuity by staying physically active, establishing strong social networks, and engaging in challenging leisure activities. Take classes, work puzzles, play games.
Importance of health/exercise Add life to your years by eating healthfully and exercising. Keep healthy foods on hand by rebalancing contents of your refrigerator to include 75 percent vegetables and fresh fruits. Build a combination of aerobic
exercise, strength training, and stretching and balance activities into your daily routine.
Estimate retirement needs Many financial professionals recommend 70 to 80% of current income as the amount needed in retirement. You may want to plan for 100 to 120% if you are retiring young, and or if you’ll need to cover all of your health care costs.
Social Security is the basic foundation of retirement planning; it replaces about 40% of an average wage-earner’s income. Benefits are based on the average of your 35 highest earnings years adjusted for inflation—called average indexed monthly earnings.
Jumpstart savings If you are behind in preparing for retirement, consider jump-starting your savings, reducing expenses, or taking a second job. Late starters might consider working longer: a few extra years provide more time to save and fewer retirement years to fund.
Understand your risk tolerance before making investment choices in today’s market. Take this 20-question online investment risk tolerance quiz: njaes.rutgers.edu/
money/riskquiz.
Dollar-cost averaging—buying investment shares with fixed dollar amounts at regular intervals—is one of the best ways to invest. Doing this will automatically purchase more shares when share prices are low and fewer shares when share prices are high. The result: more shares for less and a higher investment value as they grow.
Stock market risks are reduced if you commit to long-term investing. Between 1926 and 2007, 23 of the 81 one-year periods resulted in an investment loss, compared with only 10 of 78 overlapping five-year periods and none of the 68 overlapping 15-year periods.
Best withdrawal rate Most studies reveal that a maximum withdrawal rate of 4 to 5% at the start of retirement will assure a high likelihood that your assets will outlast you.
Diversification is important A single mutual fund can hold securities from hundreds or even thousands of companies, reducing risks from problems in a particular company or industry. Asset allocation is the process of combining asset classes—stocks, bonds, and cash—into your portfolio based on your personal financial goals.
Consider fees When selecting a mutual fund, consider fees because extra charges lower your returns. Before investing, check the Financial Industry Regulatory Authority’s Mutual Fund Expense Analyzer at http://apps.finra.org/Investor_Information/EA/1/mfetf.aspx.
Fund your IRA The Securities and Exchange Commission recommends making the maximum allowable contributions to IRAs and 40l(k) plans before buying variable annuities.
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