Retirement Age

By Mike Bischoff, CFP

Retirement Age
When planning for your retirement, age is an important factor. Do
you want to retire in your 50s or 60s? There are many things to
consider. These are some items I would advise you to include in
making your decision.

Planning Before Having Kids

  • Max out on saving while you can. Childcare, kid’s activities, and

college costs can cause the best-laid plans get thrown to the wind
later on. Before that happens, individuals need to POWER SAVE.

  •  Optimize on future tax saving by using a Roth IRA, a Roth 401k, and a

Health Saving Account (HSA). Roth contributions are funded with after-tax
dollars and, even better, HSA contributions are never taxed if used for health
care costs including future premiums.

  •  Time to stock up. As young savers, you need to ramp up exposure to

growth-oriented equities and dial back on the cash.

Juggling College and Retirement

  • Look for creative solutions. Educate your kids on the different costs of

colleges and suggest limiting their choices to more affordable schools or have
them take on some loans.

  •  Make full use of catch-up contributions. A common mistake is to take money

out of retirement accounts to pay for college. You should do the opposite and
increase contributions as college expenses start to taper off.

  •  Fix the investment mix. 401k accounts that use target date funds can have

very high internal expenses and tend to become too conservative for someone
in their 50’s.

Closing in on the Prize

  •  Wait to tap into a pension or social security until the full retirement age. Use

cash and savings in order to receive a larger amount. Social security
guarantees a 7% annual increase every year you defer payments, up to age 70.

  • Downsize your home earlier than planned. Whether that’s selling one home,

moving to a townhouse or condo, or
relocating out of the city. Some of
the advantages of downsizing can be
eliminating a mortgage payment,
lowering monthly utility and
maintenance bills, or lowering
property taxes.

  • Scale back on high risk investments. At this point, holding bonds in a

retirement portfolio won’t provide great returns. They are used to dampen
volatility and protect against losses. We suggest closer to a 60% stock and
40% fixed income mix, diversified across many different assets classes.

Each situation is different and can be complex. These decisions may take years to
make and that is why I encourage everyone to have a plan.

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