Unfortunately for many people, retirement can be a time of dependence. Whether upon friends and family or the government, many seniors find themselves unable to financially sustain themselves, which can create a sad situation not only for themselves but often for those who care about them as well.
My wife and I have no desire to live a dependant retirement lifestyle, nor do we want to be a burden upon our children. Therefore, we are driving ourselves hard to create a situation in which we are self-sufficient in retirement and are able to enjoy the benefits we might receive rather than rely upon them.
Fully understanding retirement benefits
There are several main elements that we’re focusing on understanding well before our golden years hit. Social Security — and the changes that may be coming to Social Security — is one such element.
Current estimates indicate 2033 as the year in which Social Security may start paying only partial benefits (about 75 percent). This is crucial to our aiming for further independence from this system. It means that building our own retirement savings will be more crucial to our retirement future.
Being aware of taxes
Taxes can pose a further threat to retirement independence. Not being aware of their effects upon retirement finances can leave a retiree with substantially less money than he or she counted upon. This is why I have gone back through my asset tracking page and factored tax rates into things like our retirement accounts since this money was taken out pre-tax. While we can’t be sure of exactly what our tax rate may be by the time we reach retirement, at least factoring in a 10 to 15 percent overall rate on these assets brings me closer to what we’ll really be getting paid out from such accounts when the time comes.
Working together and debt reduction
There are things that we can do as a team that we might have more difficulty with on our own. For example, we’re able to save huge amounts on childcare for the kids through my working from home. This might not seem like much when it comes to planning for retirement, but according to babycenter.com, “Depending on where you live, you’ll pay anywhere from $4,460 to $13,185 a year ($371 to $1,100 a month).” And when you’re talking about two children over a multi-year period, such savings can mean more money for retirement.
Our ability to work together also helps us stay out of debt, the payment of which can prolong retirement. A creditloan.com infographic puts the average American’s interest payments on debt at $600,000 over the course of a lifetime. By being able to pay off things like student loans, credit cards, and a mortgage, we’ve reduced our credit needs so that (hopefully) as we enter retirement, we won’t be straddled with such obligations. In the process, we hope to reduce our dependency upon credit, thereby improving our overall retirement independence.
More From This Contributor:
Building a Revenue Producing Blog
I Won’t Be Waiting to Take Social Security
Preparing to Publish My First E-book
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Calculations have not been verified by a professional. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.