Tag: retirement

When people retire, they lose their employer-sponsored health insurance. But as long as they don’t retire before age 65, most people should have access to Medicare. Medicare is the federal health insurance program for people over the age of 65, some younger people with disabilities, and those with permanent kidney failure. 

To enroll in Medicare properly, you’ll have to do some research into the different parts of the program, the premiums associated with each part, and the deadlines you’ll need to meet for submitting information. In this article, we’ll go over some of the basics of Medicare and give tips on how to prepare for the switch. 

Key Takeaways

• There are four “parts” of Medicare, including hospital insurance, medical insurance, drug coverage, and Medicare Advantage, an alternative way of receiving Medicare benefits through a private company (think HMO or PPO). 
• Most people don’t pay a premium for Part A coverage (hospital insurance), as long as they qualify for Social Security retirement or disability benefits.  
• Parts B, C, and D (medical insurance, drug coverage, and Medicare Advantage) all come with premiums, though you may not be billed for them if it’s deducted automatically from your Social Security benefit. 

The Parts of Medicare 

There are four parts of Medicare. 

• Part A (hospital insurance) covers inpatient and hospital coverage, skilled nursing facility care, and some home healthcare.
• Part B (medical insurance) covers services from doctors, outpatient care, medical equipment like wheelchairs, and preventative screenings like shots and vaccines.
• Part D (drug coverage) covers the cost of prescription drugs.
• Part C (Medicare Advantage) is an alternative way of receiving Medicare benefits in which you pay premiums to a private Medicare-approved company.

Original Medicare is the term used to refer to Parts A and B of the program. They are differentiated from Medicare Advantage (Part C), which involves a sponsor company. 

Premiums 

Most people will qualify for Part A Medicare without needing to pay a premium. If you qualify for Social Security, you qualify for premium-free-Part-A. Similarly, if you got Medicare before the age of 65, you won’t need to pay premiums for Part A coverage. 

Part B includes a premium everyone has to pay. You’ll pay the premium each month, even if you don’t get Part B covered services. It’s important to note here that if you don’t enroll in Part B coverage as soon as you’re eligible, you’ll be charged a late enrollment fee each month in addition to your premium for as long as you have the coverage. These fees will add up, and we’ll discuss below how to make sure you sign up for Part B coverage at the right time. 

Premiums for Parts C and D can vary depending on which plan you join. Be sure to consider all of your options before selecting what kind of coverage you want to receive. 

Combining Parts 

Part of the confusion surrounding Medicare has to do with which parts you can have simultaneously. For example, if you qualify for Part A coverage, you have a choice as to whether or not you want to pay the premium to get Part B coverage. You also can choose to add on Part D coverage as a stand-alone plan. 

When you enroll in a Part C Medicare Advantage plan, you actually sign up for Parts A and B with the government, even though you receive your Medicare benefits from another company. Most Medicare Advantage plans also include Part D coverage automatically, in addition to other services not covered by Medicare, like routine vision and dental care. Not every Part C plan is the same, though, so you’ll need to research carefully before selecting one. 

Medicare Eligibility Requirements 

Eligibility for Medicare is contingent on three things: being 65 or older, being a citizen of the United States, and having worked (or having a spouse who has worked) for ten years in Medicare-covered employment. There are exceptions to this, though, and some people under the age of 65 may qualify for Medicare early. 

For example, if you’ve qualified for Social Security disability benefits for at least 24 months, receive a disability pension from the Railroad Retirement Board, have Lou Gehrig’s disease, or have permanent kidney failure, you may qualify for Medicare before 65. You also have the opportunity to pay into the Parts if you don’t qualify, though you’ll need to pay additional premiums. 

The Pros and Cons of Medicare Advantage 

When deciding to opt for either Original Medicare or Medicare Advantage, there are a number of factors you’ll want to consider. Original Medicare allows you to go to any doctor or hospital anywhere in the U.S. that takes Medicare, and you usually don’t need a referral to see a specialist. This is a considerable advantage of Original Medicare as it streamlines your health services and allows you greater flexibility and peace of mind when you’re traveling. 

Medicare Advantage, on the other hand, limits you to seeing doctors and providers who are in your network. You’re also more likely to need a referral when seeking out specialists. 

When it comes to cost, Medicare Advantage is (surprisingly) sometimes the cheaper option of the two. This is mainly because Medicare Advantage plans have a yearly limit to what you pay out-of-pocket for services Parts A and B cover. Once you hit that limit, you don’t have to pay for additional costs incurred for services covered by those Parts. Also, Medicare Advantage plans generally include Part D coverage for free. 

However, this is not always the case. Sometimes Original Medicare will be cheaper, especially if the Medicare Advantage plan you enroll in has high out-of-pocket costs. Premiums vary between Medicare Advantage plans, too, so do your research before choosing. 

In terms of coverage, Medicare Advantage plans have to cover all the medically necessary services that Original Medicare covers. They’ll sometimes offer a few additional benefits, like routine vision and dental care. 

Enrolling in Medicare 

Some people will automatically be enrolled in Medicare Parts A and B if they’ve been receiving Social Security benefits for at least four months before turning 65 or received disability benefits for at least 24 months before turning 65. If you’re one of these people, you’ll be enrolled in Parts A and B without any additional action being necessary. 

Remember that you can begin taking Social Security at age 62, but your full retirement age won’t be until you’re 66 or 67 (depending on your birth year). It’s entirely possible you won’t be receiving Social Security by 65, in which case you’ll need to enroll yourself. 

Once you turn 65, you can enroll through the Social Security Administration’s website or in person at a Social Security office. You’ll want to have copies of your birth certificate, state ID, and proof of U.S. citizenship when you apply. You may also need your Social Security card and a W-2 form, though not always. 

Signing up for Parts C and D is optional and must be done separately. If you need supplemental insurance to help pay for deductible costs or out-of-pocket copays, you may also want to consider enrolling in Medigap. 

Late Enroll Fee for Part B 

It’s essential to be aware of when you become eligible for Medicare (65 for most of us) because if you don’t enroll in Plan B as soon as you’re eligible, you’ll start accumulating additional costs from late enrollment fees. 

The fee is considerable, too, totaling an additional 10% of your current monthly premium for each 12-month period you could have taken Part B insurance but didn’t. For example, if you waited a full 24 months to enroll in Part B coverage, your premium will include a 20% extra fee on top of the premium. 

These fees last for life, too, meaning as long as you have Part B coverage, you’ll have to pay the late enrollment fee. For this reason, it’s vital to enroll in Part B coverage as soon as you’re eligible if you intend on getting medical insurance through Medicare at any point in your life. 

What If I Retire Before 65? 

If you retire before 65, you’ll face a bit of a conundrum. Without employer-sponsored health insurance and without qualifying for Medicare, you may turn to a partner to try to get health coverage. As you plan for retirement, keep in mind how much you’ll pay in premiums to Medicare each month, whether you’re opting for Original Medicare or a Medicare Advantage plan. 

Healthcare costs are often the thing that throws a wrench in retirees financial plans, so having some wiggle room to account for unexpected health-related costs is often wise. 

The Bottom Line

When you turn 65, you’ll probably make the transition from an employer-sponsored health insurance plan to Medicare. At that point, you’ll need to make a few decisions and do a lot of research. Do you want Original Medicare – access to hospital insurance and medical insurance – or a private Medicare Advantage plan? Do you want to add Part D prescription drug coverage to your Original Medicare plan? Everyone will have to make decisions related to their health insurance for themselves. 

The post How to Prepare for Switching to Medicare appeared first on Due.

The first thing that people think about when planning for the future is securing an income post-retirement. Going from the comfort and stability of regular monthly salaries to depending on depreciating funds can be challenging, especially if you are accustomed to a certain lifestyle.

So if saving for retirement isn’t going to work, what should you do instead? Take a look at the ones who made it big in life — billionaires. Did you know that billionaires don’t save for retirement and still manage to maintain the same lifestyle and maybe do better even after retirement? Have you ever wondered what they do instead?

Unless you have generational wealth, becoming rich requires a great understanding of money and the market. You might not become a billionaire simply by following them, but you can certainly know the best-kept secrets of growing your money.

Saving Vs. Investing — How Billionaires Become Billionaires?

The biggest difference between a regular salaried employee and a billionaire is the way they handle money. Whether in business or post-retirement, billionaires understand that money is a depreciating asset. The value of $50k today won’t be the same 15 years later, thanks to inflation. You can see the difference yourself. The prices of gas, real estate, and even groceries have dramatically gone up.

In a situation like this, if you expect to maintain the same lifestyle post-retirement with stagnant money, we have some bad news for you— it’s impossible. So how do you secure your future? Investing is the way to go.

Why Should You Invest?

If you’re still not convinced why investing is a better way to secure your retirement life than saving, we have three more reasons for you:

1. It’s More Disciplined

When you are just saving a part of your income, it’s up to you to decide how much you want to save or whether you want to put that money aside every month or not. And it takes extreme discipline to stick to a particular saving scheme. For instance, if you are running a little short on funds for your next trip, you might be tempted to take money from your savings fund.

On the other hand, if you have invested in an organized scheme, the monthly payments will be directly deducted from your salary and transferred to the investment account. You’ll also learn to adjust your life with the reduced salary.

Along with that, since these investment schemes have a definite period and the only way to take the money out is to terminate the scheme altogether, you’ll be less tempted to withdraw those funds even when you’re short on money for a month.

2. Investments Guarantee A Source Of Income

If you’re just saving your money, your entire retirement life will depend on a fixed fund. Let’s assume you’ve managed to save $100k for retirement, and every month you take $3000 from the savings. At that rate, you will use up all the saved money in about three years. So assuming you retired at 60, by 63, you’ll be broke again.

Even if you manage to save $200k, it’ll only last about six years, and with $300k, you can manage up to 9 years. This is assuming life goes smoothly for you, and there aren’t any financial emergencies that could instantly drain a huge sum.

No matter how much you save, those funds will exhaust sooner or later. And let’s be honest, in today’s economy saving up to $300k is a dream for most of us.

But on the other hand, if you invest in a good scheme, the interests and returns will double up as a second income stream for you, one that’s passive and easy to maintain even when old age wears you down.

3. Easier To Build

Building a stable retirement plan through investing is much easier than simply saving your money. That’s because investments bring in interests and returns that add to the original principle and create an even larger amount. On the other hand, when you’re just saving for the future, the value of your funds will only go down with the year.

For instance, if your goal is to save $300k by the time you retire, it’ll be done much faster through investing than saving.

The best part is investing in today’s world is highly accessible. You don’t have to be a billionaire to grow your money. There are so many schemes with minimum entry thresholds where you can put in small monthly installments that will grow into a hefty sum 15 to 20 years down the lane.

Where Do Billionaires Invest?

You might not have the same funds as billionaires to invest in the future, but that doesn’t mean you cannot invest in the same plans and schemes. If someone is that rich, they definitely know the best places to grow money.

Here are a few common places where billionaires these days invest their money:

1. Commodities

Commodities are a great place to invest if you’re looking for a secure investing scheme that doesn’t fluctuate with inflation. After all, that’s what billionaires do. Investing in raw materials ensures that even when the prices are falling in the rest of the market, the prices of your assets will remain stable or might even go up.

Common commodities to invest in include industrial metals and resources like metal, oils, and gases or agricultural products like coffee, wheat, or pork. You can see for yourself no matter how bad the market is; these basic necessities will always be in demand.

2. Bonds

If you’re looking for a trustworthy investment option with predictable returns, bonds are a great place to start. Companies or the government use bonds to raise money from investors. When you invest in a bond, you’re essentially lending money to a third party, and the bond acts as the guarantee that you’ll get the money back with a handsome return.

Depending on the bond terms, investors might also get interested during the bond’s lifetime, providing you with a great source of passive income.

3. Stocks

Stocks are perhaps the most common investment scheme. By investing in a company’s stocks, you’re essentially providing them with fresh funds to invest in their business. Hence, every time they make a huge profit, you get a small part of it. Owning a company’s stocks is like owning a tiny part of it.

But it’s also one of the riskiest investment options for the same reasons. You have to be with the company both in good and bad times. This means if they fail to make a profit or their stock prices fall, you’ll have to take the hit and lose your money.

That’s how investments work. The greater the risk, the higher the chances of hefty returns. So if you’re looking for an investment scheme that can actually increase your wealth, stocks are a great option.

4. Mutual Funds

Mutual funds are the diluted version of stocks – a little less risk for a little less return on investment. Depending on where you choose to invest, mutual funds can be invested in bonds, stocks, short-term debts, or money market instruments. The extent of risk and reward depends on your choice of investment.

When you invest in mutual funds, the money goes into a group of stocks from different companies and industries. This increases diversity by default, reducing the risk of losing your money even when the market fluctuates. The returns might not be as high as stocks, but it’s certainly a stable option for long-term retirement planning.

5. Private Equity Funds

If you’re not afraid of risks and have the money, private equity funds are an investment scheme that can add significantly to your net worth.

Under this scheme, the investor (here: you) will invest in start-ups and small businesses, buying a small share of the company. Each time they make a profit, you get a significant share of it. Just like stocks, the risks are significantly higher here. If the company fails to make a profit or goes bankrupt, you are bound to take the fall as the investor.

That’s why it’s important to keep two things in mind when investing in private equity funds:

• Invest in a promising company after proper research. Check their competition, market demands, and past sales records before putting your money down.
• Only invest as much as you can afford to lose. It’s not a get-rich-quick scheme. Do not gamble your entire life savings at once.

A huge benefit of private equity funds is that, as a shareholder, you’ll have a say in their business operation if you feel your interests aren’t protected. Not many investment schemes offer this level of control.

Investing As A Salaried Employee

While following in the footsteps of billionaires and their investment schemes is a great way to grow your money, it’s not possible for everyone, especially if you are a salaried employee with limited growth opportunities.

Most salaried employees in the USA are living paycheck to paycheck, barely making ends meet. They don’t have the same financial privileges as billionaires to invest a hefty sum in fancy schemes. After all, most of the time, the schemes that offer the best returns also come with significant risk.

If this sounds like you, don’t be disheartened. There are plenty of safe and easy investment schemes, even for salaried individuals. Here are our top picks:

1. Traditional & Roth IRA

Traditional IRA (individual retirement account) is open to everyone who earns taxable income. This is the perfect scheme for those who don’t have a retirement plan through their employer.

The best part about investing in a traditional IRA is its tax deductible, and the income you make from it is tax deferred. You can choose how your money is invested. Whether you prefer mutual funds or ETFs, the options are endless.

2. Roth IRA

If you don’t want your income post-retirement to be taxed, you can also opt for Roth IRA. While the funds you transfer here aren’t tax deductible, you won’t have to pay any tax for the income you make. Along with that, you can take out the money at any time without any penalty. In case of financial emergencies, Roth IRA provides much-needed flexibility.

Fixed Annuities are a type of contract under which you get a fixed interest against the contribution you make to the scheme. Since the returns are paid out as monthly installments, this plan too can double up as a source of income.

Although there are multiple types of annuities, fixed annuities are the most reliable and offer the best returns. Another benefit of this scheme is there are no IRS limits— you can invest as much as you want to increase your post-retirement returns.

A Mix of Savings and Investments

Investing like a billionaire is a great way to grow your money, but it doesn’t mean you’ll be that rich someday. Most billionaires never retire at all! While some work till the last day of their lives just out of passion, others generate so many passive income streams during their active working years that they don’t need to rely on any retirement savings to rely on— and that’s exactly what we are trying to replicate here.

That being said, we’re not trying to undermine the importance of savings. No matter how many investments you have, having a separate savings fund is always best. In times of emergencies or smaller goals that require immediate cash, the liquidity of a savings fund will save your day. So whether you’re still at your job or preparing to retire, having a savings fund is a must.

The purpose of investing and its returns are here to replace your salary. When employed, you get a salary against your hard work and save a small percentage from it. And when you’re retired, you get monthly payments from these investments with zero hard work and save a small percentage— that’s the only difference.

FAQs

1. Is 1 Million Enough To Retire?

Even though 1 million sounds like a huge sum, it’s impossible to put an exact number on the ideal retirement fund. Let’s say your lifestyle requires you to withdraw $50000 annually from that fund. At that rate, your savings will be exhausted within 20 years. So if you retire at 60, your savings will be used up by the time you’re 80. Given the average life expectancy in the US, 1 million should be enough.

But if by chance you live past 80, you’ll be in deep trouble. That’s why we always recommend investing your money instead of letting it sit in the bank.

2. How Much Money Do You Need To Retire?

It depends. Most financial gurus claim you should have at least 80% of your annual income pre-retirement. This means that if your pre-retirement annual income was $100k, your post-retirement annual funds should be at least $80k.

3. How Should You Divide Your Retirement Money?

A part of your retirement planning should go into investments that offer monthly/ annual payments and replace your previous job. Another part of the savings should go into bigger investments such as your child’s wedding, education, or a world trip with your spouse. And finally, a part of your retirement planning should go into insurance for your health, home, car, or anything valuable.

4. Do Billionaires Ever Retire?

Those who work for their passion and want to make a difference don’t want to retire early, while some whose ultimate goal is financial freedom retire as soon as they can. But even if they do choose to retire, they create so many passive income sources during their working years that they don’t need to rely on a retirement fund.

5. When Is the Right Time To Retire?

There’s no universal right time to retire. But speaking from a financial point of view, you can follow any of these thumb rules.

You can retire if:

• You have saved 10 times your annual income
• You can withdraw 4% of your total savings and still have enough to last you through a certain period
• You have at least 80% of your pre-retirement annual income to spend annually post-retirement

In simple terms, when you have enough money to meet your expenses through the remaining years considering inflation, and you’re confident you can handle the emergencies, consider yourself ready to retire.

The post Billionaires Don’t Save For Retirement; Here’s Why appeared first on Due.

More and more people are entering the world of entrepreneurship. Being self-employed is appealing to many, offering freedom and control of your own future, as well as unlimited income potential. But it also has its challenges, one of which is retirement planning. 

In this guide, you’ll find out how to prepare for retirement as a self-employed individual.

People who work for a company or in the public sector usually have the benefit of company-matched 401Ks or pension plans, making saving for retirement automatic. Self-employed people, on the other hand, have to be proactive and create their own retirement plans. They also have to be disciplined enough to allocate some of their income to savings vehicles.

Planning and saving need to start early and should be based on your specific retirement goals, such as your ideal retirement age and your retirement lifestyle goals.

Understanding Retirement Plan Options for the Self-Employed

Several different types of retirement account options are available for self-employed people.

Traditional or Roth IRAs

Individual retirement accounts (IRAs) are the simplest retirement savings option. Traditional IRAs are funded with pre-tax income and grow tax-deferred until retirement. Contributions to the IRA are tax deductible in most cases, up to specified limits, which for tax year 2023 are $6,500 annually for people under 50 and $7,500 for people over 50. Some exceptions to the deductibility rules do apply, so you’ll need to check your eligibility.

IRA contributions cannot be distributed without a penalty until age 59 1/2. When withdrawals are made after that age, they become taxable income. Distributions taken before age 59 ½ are subject to income tax plus a 10% penalty. 

IRA contributions can be invested in most types of investment vehicles, including stocks, bonds, and mutual funds. There are a few exceptions, which include collectibles and life insurance policies. 

A Roth IRA has similar rules, but contributions are not tax deductible. However, the earnings of the IRA are tax-free and distributions taken after age 59 ½ are also tax-free.

Solo 401K

If you’re self-employed and have no employees, you can contribute to a solo 401K, both as an employer and as an employee. Contributions are tax deductible and grow tax-deferred until retirement, and then withdrawals are taxed. Contribution limits are much higher than with IRAs: $66,000 annually for those under 50 for tax year 2023, and an additional $7,500 for those over 50.
Of those totals, $22,500 can be contributed as an employee, and 25% of your net income can be contributed as an employer up to the $66,000 total contribution limit.

SEP IRA

A simplified employee pension (SEP) IRA can be established by an employer or a self-employed person. If you don’t have employees, you can make tax deductible contributions to the SEP IRA, and contribution limits are higher than those of traditional IRAs. If you have employees, you can make contributions on their behalf into individual SEP IRAs, and those contributions are also tax deductible. 

Contributions made on behalf of employees are discretionary, so you can change the contribution amounts at any time, as long as your contribute equally for all eligible employees. 

Contributions are limited to the lesser of 25% of income or $66,000. 

SIMPLE IRA

A Savings Incentive Match Plan for Employees (SIMPLE) IRA allows both employee and employer contributions. As the business owner, you can make your own contributions both as an employer and an employee. The employee contribution limit is $15,500 and the employer contribution limit is 2% of your net earnings

Succession Planning

A succession plan is a plan for what happens when you retire, die, or become disabled. It should also be part of your retirement plan. When you retire, you may want to sell the business outright, or you may want to hand over the reins to a family member or a key employee. You need to have clear documentation about how and when this will happen, as well as a plan to transition the person or persons into their new role.

A succession plan can contain a provision in which you, as the business founder, continue to receive residual income from the business, which is why it’s an important part of your retirement plan.  

Creating a succession plan involves several steps.

Timeline Planning

First of all, you’ll need to determine when you’ll transfer the business to your successor. Presumably, you have a target retirement age, so you’ll need to determine your retirement date. You also should have a contingency plan for what will happen to the business if you die or become disabled before that date, or what happens if you decide to retire early.

Choose Your Successor

Choosing your successor may be a difficult decision, particularly if you have multiple family members involved in the business or who are interested in taking over the business. However, your decision should be a practical one. You’ll need to choose a person or persons who are qualified to manage the business so that the business has a better chance of survival after you retire. This will also protect the residual income that you plan to take from the business.

You can choose to transfer ownership to multiple family members or key employees, but you’ll need to determine how that ownership will be divided. You should also determine what the key roles of each person will be. For example, perhaps one person is most qualified to handle the finances of the business, while another is more skilled at operations.

You can create an organizational structure for your business that will make these future roles very clear. 

Document Your Processes

 

Your successor or successors are going to need to know how you’ve made the business successful, so basically, you should draw up a blueprint for managing the business. You need to document your operational processes, your key personnel, your marketing strategy, your financial processes, and your human resources processes. 

You’ll also want to highlight your keys to success. What has helped you most in growing your business to this point? 

Create a Transition Plan

The first step in creating a transition plan is evaluating the skills and experience of your successors, to understand any training that you’ll need to do. This training can occur during a transitional period in which you’re still present in the business, and working side by side with your successors to give them hands-on training and experience. 

You’ll need to establish terms for this transition period in terms of responsibilities and compensation. This transition plan should be clearly defined in writing. You’ll also need to establish how long this transition period will last. 

Create a step-by-step plan for this period. You may want to have all your successors involved at the same time, or you may want to transition them one by one so that you can give them more of your time. 

The point is you need to document exactly how you’re going to prepare these people to take over your business.

Create an Ownership Transfer Agreement

You’ll need to create a formal agreement regarding the transfer, which you should do with the help of an attorney. The agreement should specify the financial terms of the agreement, including your residual income amount, and the timeline of the transfer.

It will also need to specify any formal procedures that will need to occur, including transferring the ownership of the business entity (such as an LLC), and how items like business insurance, contracts, leases, and any other agreements will be transferred. 

Your attorney can help you to determine all the terms and provisions that the agreement should contain. 

Determining Your Retirement Needs

As mentioned, your retirement plan should be based on your goals for retirement. How much you save will be based on those goals and how much you’ll need to retire to meet those goals. Calculating your necessary savings plan includes making investment growth projections and factoring in things like inflation and life expectancy. 

If you plan to sell your business when you retire or pass it to successors, those will also need to be factored in.

It’s a complicated process to calculate your savings needs and is best done with the help of a financial advisor.

Strategies for Boosting Retirement Savings

First of all, you have to be disciplined about saving and maximizing your contributions as much as you can. You also need to be disciplined about your spending and live within your means so that you’re saving as much as possible. 

Your retirement account investment vehicles should be diverse and should be balanced at different stages of your life based on your age and risk tolerance. Again, your financial advisor is your best bet to build a portfolio that will help you to achieve your goals. 

You also are, obviously, not limited to retirement savings accounts. You can have other investment accounts that can grow for you over time. You can also make investments in other vehicles like real estate. Building a portfolio of rental properties over time can give you supplemental income when you retire. 

Boosting Retirement Income

When you get to the retirement point in your life, hopefully, you’ll have enough income from your business and your retirement accounts to support the retirement lifestyle you’re looking for, but often retirees seek ways to boost their income. 

Also, as an entrepreneur, you may not be comfortable without something productive to do, which is why many retiring self-employed people these days are starting a new small business as a side hustle. In fact, one study showed that 40% of baby boomers have started a side hustle. 

One idea is to start a consulting business to put your years of business experience to work. Management consulting, in particular, is in high demand, so with your credentials you could probably find many local small business owners who need your services. Focus on whatever your skills are, though, so if you feel that your strength is in operations, do operations consulting. 

Any type of consulting could bring in a healthy extra income, and you can work on your own time. 

Another idea is freelancing using a skill that you’ve acquired. Perhaps you became an expert at digital marketing during your time as an entrepreneur, so you could perform digital marketing services as a side hustle. Or maybe you developed great writing skills and could combine them with your business experience to be a freelance business writer.

If you want more passive income, you could create online courses. Many websites allow you to create your own course curriculum and upload it, and then students pay to access your courses. Once you have your curriculum developed, you don’t have to do much but answer student questions. 

One more idea is to start a part-time bookkeeping business if that’s a skill you’ve acquired. You can probably bring in a few hundred dollars a week, even by just working a few hours. 

If you’re more of a get out of the house type, you could consider investing in distressed properties to rehab and resell. This is a great option, especially if you have handy skills. It’s something you could do periodically when you just need a project, or you could do it on a regular basis. House flipping can bring in quite a profit if you do it right.

Rely on Professionals

Planning for retirement, whether you’re self-employed or not, is not a do-it-yourself project. A financial planner is essential to creating a comprehensive financial and retirement plan, and a plan to meet your shorter-term financial goals. You should look for a financial planner that also has experience in succession planning so that they can help you through that process.

An attorney is also a necessity when creating your succession plan and documents.

Conclusion

The most important thing for you to take from this article is that the time to start retirement planning is now. It may seem as though retirement is a long way away, but to achieve your retirement goals, you have to have a long-term plan. You also have to teach yourself to be disciplined about saving and follow the advice of your financial planner. If you take the right steps, you can spend your retirement years exactly how you choose. 

The post Retirement Guide for the Self-Employed appeared first on Due.

The notion of retirement calls to mind a life of ease—most see it as a new chapter in life wherein one has more time for hobbies and leisure. However, the modern idea of retirement paints a different picture. It shows that behavior during retirement varies significantly from conventional expectations.

Today, the amount of free time you have during retirement largely depends on retirement readiness. Moreover, individual attitudes towards retirement differ based on financial and personal factors.

According to a survey on US workers conducted by the Transamerica Center for Retirement Studies, 57 percent of the respondents plan to work after retirement. Of this percentage, 21 percent plan to work full-time, while 36 percent expect to work part-time. In another survey conducted by the mortgage lender American Advisors Group or AAG, a third of seniors seek to work past retirement age, or have no desire to retire at all.

Retirement does not always spell the end of your working career. It can provide opportunities to augment your retirement savings or open up a new career path. While the idea of a post-retirement career sounds contradictory, retirees or those planning for retirement constantly redefine their later years.

For example, it is never too late to embark on emergent fields in technology, or career opportunities in computer science even for retirement age workers.

Taking on a post-retirement career or a new job in retirement can be a beneficial strategy for older workers. Not only does a post-retirement job provide additional income, but it also offers opportunities for growth, socialization, learning, and fulfillment.

Outside of paid work, it can be a way to pursue a lifelong dream that stayed dormant in one’s younger years. It can also pave the way for being self-employed or starting a new consultancy business.

However, before you consider embarking on a post-retirement career, there are several points you must consider to determine if working past retirement is the right path for you.

What is a post-retirement career?

A post-retirement career is a job you pursue past the conventional retirement age or after formally exiting the workforce and entering a new financial stage. Post-retirement career planning refers to the planning process to engage in career-related activities past the retirement age actively. Moreover, it often involves introspection that considers many variables: financial, health, social, and psychological.

Historically, the retirement picture has shifted according to socioeconomic conditions. Before the 20th century, the idea of retirement barely existed. People worked as long as they could. However, Social Security was introduced in the first half of the 20th century. The introduction of Social Security made retirement a statutory opportunity.

Within the latter half of the 20th century, gender profiles began to emerge, with male workers striving towards retiring earlier and women workers working to delay their retirement. From 1980 to 2000, men’s retirement age declined due to socioeconomic conditions. Socioeconomic conditions past 2000 changed the retirement situation again as populations age and economies flounder.

Retirement today is a pension-receiving state involving some detachment from regular employment. However, this definition is flexible, as it allows for further work.

The definition of retirement today generally allows for a post-retirement career. Previously viewed as a complete stoppage of work, the current idea of retirement has become more malleable and has transformed into a late-career development stage. It could also mean voluntary engagement in various occupations as a means of self-actualization.

1. Be Clear About Your Reasons for Returning to Work

Before establishing a post-retirement career, consider whether you are comfortable returning to work when many of your peers appear to be slowing down. What are your reasons for going back? Such explanations should be clear before you embark on a new post-retirement job.

Some people work after retirement because they need an additional source of income. Their nest egg may not be enough to support their retirement, or they must earn more to support a better lifestyle and afford some luxuries. Some Americans expect to work past retirement age because their plans and savings weren’t sufficient to cover all the retirement costs.

Others work past retirement to regain their sense of identity, restore social connections with coworkers or clients, meet new people, restore a sense of purpose, explore new opportunities, and embark on new pursuits—perhaps an unfulfilled passion in a new industry.

One compelling reason to start a post-retirement career is the health benefits. It is possible to gain health benefits from working past retirement. Working longer and overall health can mutually reinforce each other, but there are conditions attached—your post-retirement career should be a satisfying one.

2. Learn How To Pursue a Career Post-retirement

After deciding to pursue a post-retirement career and carefully evaluating your circumstances and reasons, you should prepare for this new phase in your life. Plan to get back into the workforce and equip yourself with what you need for a successful post-retirement career to ensure a smooth transition.

Re-skill and Upskill

Suppose you are trying to enter a new industry or career requiring technical knowledge. In that case, it is ideal to supplement your existing knowledge with formal courses taught at your local university. You can also work on technical certifications and industry-specific programs provided by industry organizations, foundations, private companies, or the government.

Take advantage of the numerous online resources available to update your skills according to the present demands. Find a reputable institution or provider and choose the course or skill relevant to your employment goal. You can also fill gaps in your professional knowledge through e-books, industry-based publications, webinars, podcasts, e-newsletter subscriptions, and specialized YouTube channels.

Decide how much work you devote to your new career.

A post-retirement job can become a big commitment, so before applying for work, consider just how much responsibility you are willing to take on and how much time you are ready to devote. An aging workforce is more likely to prefer part-time work versus those in other age brackets.

Luckily, post-retirement careers generally provide opportunities for greater flexibility. If you remain interested in your field yet want to retire, you can downshift a little and transition from being a full-time employee to a part-time worker or a consultant. Consultancies allow you to work for a few days per week.

Do a self-evaluation on what you find fulfilling.

Retirement is an opportunity to pursue a passion. Your golden years could be your chance to succeed in an encore career. This way, your post-retirement job can take on more meaning than merely a way to generate additional income.

Beyond supplementary income, your “second wind career” or encore career can be a great source of personal joy and gratification. Moreover, doing what you love can relieve stress and pressure from your retirement job.

To hone in on your passion, consider opening yourself up to new experiences to kickstart a process of self-discovery. Another way to spark a new passion is to expand your social circle. Meeting new friends can expose you to new perspectives. Furthermore, some recommend that you look back to your childhood. Revisit your earliest interests and passions. What made you happy in your younger years? The answer could provide clues to your ideal retirement profession.

Take advantage of new hybrid setups and remote work.

Today you can decide on the workplace setup of your post-retirement career. Think about the location and the amount of independence you want. Working online or applying for hybrid settings could offer you the best of both worlds—the opportunity to mingle with coworkers and precious time at home.

Flexible work allows you to fit in healthy habits like exercise. To get into the digital nomad lifestyle, you can explore remote or exotic overseas locations while earning an income.

3. Have Realistic Expectations About Your Career Transition

It is essential to set realistic expectations when you “un-retire.” While there are broader and more varied options for a post-retirement career, remember that the transition may be somewhat rocky.

The decision to try a new job may result from an initial economic shock. Some find themselves under sudden financial strain or with unexpected healthcare costs. Handling this delicate transition is crucial to your psychological and financial well-being. Managing your expectations about your new job is essential, especially if it is a contingency or emergency measure rather than a passion project.

Moreover, it may take time for you to find a new job. The delay and the rejections may cause you to lose self-confidence. Adjust your attitudes and gather a support system to help you deal with the strain of the transition.

4. Understand the Hidden Costs of Your Post-Retirement Career

Working past retirement age could have unintended consequences on one’s overall retirement income. There are risks and trade-offs—you may find that your benefits as part of your passive income could change with your new working status.

Working post-retirement could affect your eligibility for some healthcare programs. It can impact Medicare, pensions, and retirement accounts. In addition, Social Security benefits could get more complicated when you are of retirement age and start earning an income. The US Social Security Administration uses a formula called “combined income” to evaluate the taxable amount of your paycheck.

Is Social Security Taxable?

While Social Security accounts for approximately 50 percent of Americans’ income in retirement, those who continue to have other sources of income, including work, need to understand the concept of “combined income.”

You should expect income taxes on your Social Security benefits if you have a part-time job, a 401(k), or a full-time post-retirement career. Those who depend exclusively on Social Security for their retirement income will likely avoid paying taxes on their benefits.

Thus, compute your costs in tandem with your gross income. Carefully consider the pros and cons of your decision.

5. Know Which Jobs To Pursue After Retirement

Once you’ve weighed your options and are ready to embark on a new career; it’s time to consider the best jobs suited to your qualifications and new goals.

Your choice of a post-retirement job matters, as it determines your financial and overall well-being. The following are some rewarding jobs to pursue in your post-retirement career:

Business or Management Consultant

If you have experience at the executive or management level, business consultancy could be right for you. You can leverage your knowledge of business processes, management practices, and culture or training. Consultancies can offer you the best of both worlds—a desirable income, prestige, and flexibility. Moreover, a consultancy can morph into a small business. In fact, as an independent consultant, you ought to already view yourself as a small business.

When building a management or business consultant career, you must evaluate your market, define your niche, create a sales and marketing plan, and hire people to make the most of your own business.

Bookkeeper

Bookkeeping may offer you a steady retirement paycheck if you are an accountancy graduate or pursued accountancy as a full-time career pre-retirement. Bookkeeping can keep you happily engaged if you enjoy recording data, being detail-oriented, and tracking client payments.

To be efficient and competitive in your field, you must be familiar with the most recent versions of accounting software, so be sure to re-skill or upskill as required.

This job pays modestly at $20 per hour and can be a reliable part-time source of post-retirement income. As you can take on as many or as few clients as you like, this job gives you great flexibility in planning how much work you wish to take on.

Engineer

Being in a technical field may be a way to stand out and get hired quickly. If you pursued a technical career before retirement, or have a background or education in engineering in a specific field, consider seeking engineering jobs. Engineering jobs are usually in high demand because employers need in-depth knowledge and experience.

Your years of career work in engineering may pay off as employers need the professional judgment of those with years or decades in a narrow or specific field. What’s more, your experience qualifies you for many leadership roles and roles for training young professionals.

There is no cookie-cutter path to follow when you’re an engineer looking for a post-retirement job. You can take many different approaches, carrying your expertise with you. Such positions include engineering professor, environmental consultant, engineering supervisor, electrical designer, etc.

Joining a Board

Joining a board is an excellent path to leverage your management and corporate experience. As a corporate director for a nonprofit, you can earn up to $115,000 if you sit on the board of a large private corporation. Moreover, a board seat at a public corporation could pay up to $214,000.

Remember to earn the necessary certifications, such as directorship certifications, to advance your career and maximize your income in this area. This type of post-retirement career could be both lucrative and fulfilling, as board seats often carry prestige with them aside from the prospect of a sizable paycheck.

Adjunct Professor

An adjunct professor is part-time and may be labeled contingent faculty. Adjunct professors are not considered part of a university’s permanent teaching staff. Such professors are also not on the way to being tenured. Instead, they are contract employees and enjoy the freedom of deciding on a teaching schedule that aligns with their work preferences.

You can teach one or several classes as an adjunct professor. You can even accept jobs from multiple schools. To qualify for an adjunct professor role, you need good communication and presentation skills, technology skills, and the ability to create course materials that align with the university’s teaching guidelines.

Moreover, you must fulfill specific academic requirements, such as a master’s degree or even a Ph.D. If you have an advanced degree, working post-retirement as an adjunct professor at a local US college could be a great choice. Compensation ranges from $1,500 to $3,000 per course.

Another bonus of taking on an adjunct professorship is the environment. Several college towns rank among the best retirement places in the US.

Build a Lucrative Post-Retirement Career by Leveraging Your Best Skills

While accumulating a sizable nest egg is the ideal way to prepare for retirement, many find themselves in various situations that could be more financially ideal. Hence, the concept of retirement today has become more fluid. It is now the next step in career development rather than the complete work stoppage.

There are many reasons to pursue a post-retirement career; however, finances are not necessarily the main factor. People work past retirement age for a sense of identity, to follow a new mission, keep themselves active, afford luxuries, meet new people, and benefit their health.

Your choice of post-retirement career contributes significantly to your overall mental well-being and work-life balance. The best post-retirement jobs combine a satisfactory income with high levels of career fulfillment. It would help if you tapped into the benefits of continuing education, upskilling, or even re-skilling to make your job search easier. Upskilling enhances your current skill set and maximizes your employability and potential income as you take on a new post-retirement job.

Remember that you can turn age into an advantage in your later career. Older workers have benefits such as long-term experience, mentorship potential, leadership skills, decisiveness, certifications, higher academic achievement, and technical depth. Take stock of the core strengths of your lifelong experience and learn to leverage your skills to make the best of this new and potentially fulfilling encore in your career life.

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What does financial independence feel like? Well, you won’t have to worry about living paycheck to paycheck, and you’re free to pursue your passions, travel the world, or spend time with your family. While these all may sound like a dream, you can live this dream if you can manage to retire with $1.2 million. 

What’s more fascinating is that you can gather this $1.2 million in just six months. Surprised? Indeed, it sounds too good to be true, but it’s possible with the right strategy and determination. Read this post to learn more! 

The $1.2 Million Retirement Strategy

It is a given that you must have a particular income level to be able to save $1.2 million in a short time span. Individuals with an average annual income of $1,00,000 cannot save this hefty amount in 6 months. You need to determine a realistic starting point from where you can reach the $1.2 million goal. 

Let’s say you’re 55 and want to save up this sizeable sum in a short time span. If you’ve worked your entire life, you must already have a portion of your earnings stacked up in various accounts. You now want to take that sum and turn it into $1.2 million. This, also challenging in itself, is not unachievable.

1. Set Your Retirement Goal

Before embarking on your journey to amass $1.2 million in just six months, you must establish a clear retirement goal. This involves two essential steps:

Determine how much money you’ll need to maintain your desired lifestyle once you retire. Consider factors like housing, healthcare, travel, and other expenses. You can use retirement calculators or consult a financial advisor to help you estimate your needs accurately.

While this strategy aims to help you achieve your goal in six months, setting realistic expectations is crucial. Figure out how quickly you can save and invest to reach your target.

2. Save Aggressively

To achieve $1.2 million in such a short time, you’ll need to save aggressively. This includes two primary actions –  cutting expenses and maximizing your income.

Before you can cut your expenses, you need to know where your money is going. Use a budgeting app to track every dollar you spend. This will help you identify areas where you can cut back. In addition, focus on eliminating or minimizing non-essential costs, such as dining out, entertainment, or shopping. Be ruthless with your spending cuts, but don’t forget to balance frugality and happiness.

Don’t be afraid to ask for a raise or look for higher-paying job opportunities. Remember, every additional dollar you earn can be channeled toward your retirement stratergy. Besides, consider taking on a side gig or creating passive income sources, such as renting a room, investing in dividend stocks, or starting an online business.

3. Smart Investing

Aggressive saving alone won’t get you to $1.2 million in six months. You’ll need to invest wisely and take advantage of compound interest and growth. You can achieve this through the following.

Allocate your investments across a mix of stocks and bonds, which can provide both growth potential and stability. Consider low-cost index funds and exchange-traded funds (ETFs) to minimize fees. Additionally, consider Real estate investments, such as rental properties or real estate investment trusts (REITs). They can offer diversification and additional income streams. You can also consider adding alternative assets like cryptocurrencies, commodities, or peer-to-peer lending to your portfolio for additional diversification.

Automate reinvesting your dividends and capital gains to accelerate your portfolio’s growth. Besides,  leverage tax-deferred accounts, such as 401(k)s and IRAs, to grow your investments more efficiently. Periodically review and adjust your asset allocation to maintain your desired risk level and stay on track with your investment goals. Most importantly, invest consistently over time, regardless of market conditions, to reduce the impact of market volatility on your portfolio.

4. Accelerating the Process

If you’re determined to reach $1.2 million even faster, you should consider catalyzing the process.

If you receive an inheritance, resist the temptation to splurge and use it to bolster your investments. Besides, channel any extra income, such as work bonuses or tax refunds, directly into your retirement savings.

In some cases, borrowing money at a low-interest rate may make sense to invest in higher-return assets. However, this strategy comes with inherent risks and should be approached cautiously. In addition, you should consider reducing your interest payments and simplifying your financial life by refinancing or consolidating high-interest debt into lower-interest loans.

Ensure you claim all available deductions to lower your taxable income and keep more money working towards your goal. Besides, offset taxable gains by strategically selling underperforming investments to harvest tax losses.

5. Building Your Financial Support Network

Surrounding yourself with like-minded individuals and experts can provide valuable support, guidance, and encouragement as you pursue your retirement strategy. 

Join personal finance and investment forums or social media groups where you can ask questions, share your journey, and learn from others with similar goals. Besides, attend local personal finance workshops or meetups to network with others interested in achieving financial independence and early retirement.

Collaborate with a certified financial planner (CFP) or a fee-only financial advisor to ensure that your strategy aligns with your goals, risk tolerance, and timeline. In addition, consult a tax expert to optimize your tax strategy and maximize your savings.

6. Develop a Winning Mindset

Cultivating the right mindset is crucial to achieving your retirement goal. Train yourself to resist the temptation of immediate rewards in favor of long-term financial security. Additionally, accept setbacks as learning experiences and use them to refine your strategy and grow as an investor.

Create a vision board or write down your goals to prioritize retirement aspirations. Besides, share your goal with a trusted friend or family member who can offer support and hold you accountable.

7. Planning for Life After Retirement

While your primary focus might be achieving your $1.2 million goal, planning life after retirement is essential.

Retirement offers the perfect opportunity to explore your interests, develop new skills, and pursue your passions. Consider dedicating your newfound freedom to giving back to your community or supporting a cause close to your heart.

Maintain and build connections with friends, family, and peers to stay socially engaged and avoid isolation in retirement. Invest in your physical and mental well-being by staying active, eating healthily, and engaging in joy and relaxation activities.

8. Preparing for the Unexpected

Life can throw curveballs, so you must be prepared for unexpected events that may impact your finances. Aim to save 3-6 months’ living expenses in a separate, easily accessible emergency account. Regularly contribute to your emergency fund, even if you aggressively save and invest for your retirement goal.

Protect your loved ones with a suitable life insurance policy. Besides, secure your income if you cannot work due to illness or injury. You can do so by investing in disability insurance.

9. Monitoring and Adjusting Your Strategy

Your financial journey will likely require ongoing monitoring and adjustments to stay on track and adapt to changes in your life and the market. Conduct quarterly or annual reviews of your financial progress, evaluating your savings, investments, and overall net worth. As your life circumstances change, reassess your retirement strategy and adjust your plans accordingly.

Keep up to date with market trends, economic news, and investment insights to make informed decisions about your portfolio. Besides, consider adapting your investment strategy to changing market conditions. However, you shouldn’t overlook the importance of focusing on your long-term goals and risk tolerance.

10. Celebrating Milestones and Successes

Acknowledging and celebrating your progress along the way is essential, as it helps maintain motivation and provides a sense of accomplishment. Break your $1.2 million goal into smaller, achievable milestones, such as reaching $100,000, $250,000, or $500,000 in savings and investments. When you reach a milestone, reward yourself with a small indulgence or experience that aligns with your values and budget.

Document your progress and share your experiences through a blog or video to inspire and educate others. In addition, offer guidance and support to others pursuing similar financial goals by becoming a mentor or coach.

11. Ensuring a Sustainable Retirement Lifestyle

Once you’ve achieved your $1.2 million goal, it’s vital to maintain a sustainable lifestyle that allows you to enjoy financial independence without depleting your nest egg.

Determine a safe withdrawal rate to maintain your desired lifestyle without exhausting your savings. A commonly recommended rate is 4% per year, which may vary based on your circumstances and market conditions. Account for inflation when determining your withdrawal rate to ensure your purchasing power remains consistent throughout retirement.

Keep a portion of your wealth invested to continue growing your assets and provide a hedge against inflation. You should keep on exploring new investment opportunities. This way, you can stay engaged with your financial strategy.

Regularly review your spending habits and adjust as needed to avoid lifestyle inflation and overspending. Besides, embrace a minimalist lifestyle to focus on what truly matters and reduce unnecessary expenses.

12. Achieving a Work-Life Balance During Your Pursuit

While striving for financial independence and early retirement, it’s crucial to maintain a healthy work-life balance. This will ensure you don’t burn out and can continue enjoying life while pursuing $1.2 million.

Create routines that separate your work and personal life, such as specific work hours or dedicated spaces for work and relaxation. You should also schedule regular self-care activities, such as exercise, meditation, or hobbies, to maintain your overall well-being.

Make time for your friends and family, and engage in activities that strengthen your relationships. Remember, cultivating a network of supportive friends, family, and peers can help you stay motivated throughout your journey.

Be aware of the physical, emotional, and mental signs of stress. They typically include fatigue, irritability, or difficulty concentrating. To combat stress, you can implement healthy coping mechanisms, like deep breathing, journaling, or seeking support from a therapist.

Practice gratitude by acknowledging the positive aspects of your life and celebrating your achievements, both big and small. Engage in activities that bring you joy and satisfaction. Depending on your preference, consider spending time in nature, exploring new hobbies, or simply enjoying quiet moments of relaxation.

FAQs

1. If I start with little or no savings, can I still achieve $1.2 million in 6 months?

While it’s more challenging, it’s not impossible to accumulate a big amount in a tight timeline. However, to achieve this goal, you will have to work hard! Try to maximize your income, cut expenses, and invest aggressively while being mindful of the risks involved. You can also consider consulting a professional who can help you with a realistic savings plan.

2. What if I cannot save 50% or more of my income?

Saving 50% of your income is indeed a challenging endeavor. However, if you manage to save as much as you can, you will find it easier to achieve your financial goals. The more you save, the better your financial future is expected to be. You can leverage different investment strategies to amplify your savings.

3. Is it safe to invest aggressively in a short period?

Aggressive investing carries higher risks, but it can also yield higher returns. Balance your risk tolerance with your desire for rapid growth, and always be prepared for market fluctuations. For best results, take professional help when choosing investment instruments.

4. How can you prevent lifestyle inflation after reaching your financial goal?

Preventing lifestyle inflation after achieving your financial goals is not a piece of cake, and you will need to stay true to your commitments. Don’t compromise on financial discipline, and stick to your budget even after achieving your goal. Besides, resist the temptation to overspend and focus on upholding your financial independence.

5. Can you maintain your current lifestyle after retirement with $1.2 million?

Your ability to maintain your lifestyle depends on your expenses, investment returns, and how long you expect to live in retirement. Use retirement calculators or consult with a financial advisor to estimate your needs.

Conclusion

Achieving $1.2 million in six months might seem like a lofty goal, but you can reach your goal with the right mindset, aggressive saving, and intelligent investing. Embrace the challenge, stay disciplined, and remember to celebrate your progress. Save as much as you can and invest sensibly, and you will secure a fantastic life after retirement!

 

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