Late Retirement Planning: Pitfalls and Ideas

Not all of us are the perfect retiree, with maxed-out IRAs and TSPs and a perfect financial plan. Sometimes, the realities of life have gotten in the way and make it hard to save appropriately for retirement. However, when it gets closer, there are still steps you can take to make sure that you retire safely and comfortably, with a good chunk of hard work.

Stash all the money you can

Since you haven’t had the time for interest to build up, now is the time to start fixing that. If you have access to a TSP account, this would be the best way to save, although you should talk to a TSP specialist to find the right funds for you. If you do not have access to a TSP or 401(k), then a traditional or Roth IRA would be the best place to start, making the maximum allowable contribution.

Don’t expect to rely on Social Security

Social Security and Medicare are currently in danger. While it is not very likely that the program will crash and burn entirely, the fact that the tax laws related to Social Security changed from being tax-free to getting taxed up to 85% in the highest tier means that going forward, relying too much on Social Security could end up being a disadvantage, even if you consider yourself to be in the middle class. However, staying with your job can add to your social security benefits by as much as 7% per year, so the option is still theoretically viable so long as you make intelligent investments.

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Work Part-Time as a Supplement

One way to help you as you ease into retirement is downgrading to a part-time job instead of fully quitting the workforce. Not only does this potentially ease the transition into the 25 to 30 years you could potentially be living in retirement, but you could also make some extra money to supplement your savings.

Don’t forget to account for inflation

We are currently in a period of minor inflation, but to become complacent in this period is a dangerous idea. Since you could be spending twenty-five-plus years in retirement, even a minor inflation rate of 3% cuts your purchasing power in half over twenty years. Don’t just make sure that your post-retirement income will match your current cost of living- make sure that you account for the potential weakening of your money over a period of time.

If you feel like you cannot do all of this planning on your own, consulting a financial expert with specialization in the Federal space may be a good idea.

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