Retirement income planning becomes critical as older individuals approach retirement. However, not everyone knows what they will be doing upon retirement. Poor retirement literacy can contribute to the prevalence of common planning mistakes. Addressing this lack of knowledge is critical, particularly way before the event arrives.
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Social security, for instance, is far more important than investments as a factor in many retirement plans. Although the right investments will determine the size of the retirement fund, it is far more critical for older adults to ensure that their social security lasts as long as they can possibly have need for it. Deferring social security has a greater impact on long-term financial security past retirement than increasing contributions to investment accounts.
In addition, total lack of knowledge of the exact amount of retirement fund to be received from corporate sponsored retirement plans is a critical oversight that can have long-term repercussions. Finding out that one is receiving a lot less than previously thought can throw off income and expense strategies.
Tax efficiency is another aspect of retirement that should not be overlooked. Taxes can apply to investment funds set aside for retirement. Often, a person planning for retirement may choose to be tax efficient today to maximize the number of funds stored away in retirement, not knowing that taxes may apply to retirement income in the future. Thus, paying sooner rather than later may be the most tax efficient option.
Because what is truly tax efficient and what isn’t considerably varies, it pays to have an accountant on call for assistance in navigating through the complex world of taxes in retirement.
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