Are You Financially Ready to Retire?

When determining whether a person has the financial resources necessary to enter retirement, a reverse mortgage can be a helpful tool for anyone who thinks they may need to find a way to create additional cash flow.

The day is finally approaching. You've been saving and investing most of your life for this moment, but now you're not so sure you're ready to retire. It's a predicament faced by many employees that we work with. While retirement readiness has many non-financial components to it, here's how you can know if you're financially ready to retire:

1) How much income will you need??Don't make the mistake of "guestimating" your expenses. That might be fine when you're decades away, but you don't want to discover that you've underestimated your income needs several months into retirement. Instead, start by?tracking ?your actual expenses over a few months and then factor in any adjustments you foresee to your lifestyle (like downsizing or relocating) to create a?retirement budget .

2) What will you be receiving from Social Security??You can run a projection on the?Social Security web site ?and enter the exact age you plan to collect. If you're married, don't forget that you and your spouse get the higher of your own benefit or a?spousal benefit ?that's about 1/2 the other spouse's full Social Security benefit if they’ve for benefits.

3) What other income will you be receiving??If you're fortunate enough to qualify for a pension, get a pension estimate. Include net rental income from any real estate you own. I'd be hesitant about including income from a part-time job or business since you don't know how long that income will last. You might want to consider that “bonus” money instead.

4) How much can you safely withdraw from your retirement savings??First, add up all of your retirement savings, including retirement plans from previous jobs, your current employer's plan, IRAs, and any other investment accounts intended for retirement. Then multiply that total by 4%, which has been?found ?to be the highest historically safe inflation-adjusted withdrawal rate from a diversified portfolio over 30 years. (Some argue it should be?higher ?or?lower .)

5) How much will you owe in taxes??Your taxes will vary based on your mix of income sources and what state you retire in.

If your retirement expenses and taxes are more than your income in retirement, you may want to consider?reducing your retirement expenses , purchasing an?immediate income annuity , taking out a?reverse mortgage , or working a bit longer. Otherwise, you probably have the financial resources to retire.?Hguestimating" your expenses. That might be fine when you're decades away, but you don't want to discover that you've underestimated your income needs several months into retirement. Instead, start by?tracking ?your actual expenses over a few months and then factor in any adjustments you foresee to your lifestyle (like downsizing or relocating) to create a?retirement budget .

2) What will you be receiving from Social Security??You can run a projection on the?Social Security web site ?and enter the exact age you plan to collect. If you're married, don't forget that you and your spouse get the higher of your own benefit or a?spousal benefit ?that's about 1/2 the other spouse's full Social Security benefit if they’ve for benefits.

3) What other income will you be receiving??If you're fortunate enough to qualify for a pension, get a pension estimate. Include net rental income from any real estate you own. I'd be hesitant about including income from a part-time job or business since you don't know how long that income will last. You might want to consider that “bonus” money instead.

4) How much can you safely withdraw from your retirement savings??First, add up all of your retirement savings, including retirement plans from previous jobs, your current employer's plan, IRAs, and any other investment accounts intended for retirement. Then multiply that total by 4%, which has been?found ?to be the highest historically safe inflation-adjusted withdrawal rate from a diversified portfolio over 30 years. (Some argue it should be?higher ?or?lower .)

5) How much will you owe in taxes??Your taxes will vary based on your mix of income sources and what state you retire in.

If your retirement expenses and taxes are more than your income in retirement, you may want to consider?reducing your retirement expenses , purchasing an?immediate income annuity , taking out a?reverse mortgage , or working a bit longer. Otherwise, you probably have the financial resources to retire.?Here are a few steps you can take to help make sure you stay that way: here are a few steps you can take to help make sure you stay that way:

6) Make sure your portfolio is diversified and low cost.?Keep in mind that the 4% rule was based on a diversified portfolio of market indexes. The simplest way to mimic that is with a target date retirement income fund made up of index funds since they're each designed to be a fully diversified "one stop shop" for people in or approaching retirement. If you prefer a more customized approach, consider using a financial advisor that can design a portfolio for you.

7) Plan for long term care.?You can see your entire nest egg wiped out by?long term care costs . That's because Medicare and other health insurance policies don't cover it. Medicaid does, but it's a poverty program that requires you to spend-down virtually all your assets to qualify and many places don't accept Medicaid.

Long term care insurance can protect your assets and your choice of care. In particular, see if your state offers a?long term care partnership program . Purchasing a policy through one of these programs can protect your assets even if you use up all the insurance benefits and have to rely on Medicaid.

8) Have a withdrawal strategy.?It's not just how much you're withdrawing but where you're withdrawing from. If you're withdrawing from pre-tax as well as tax-free (Roth) and regular investment accounts, you have the opportunity to?structure your withdrawals ?to minimize taxes and even reduce health care costs in retirement. If your situation is complex, this is an area where a tax-aware?financial advisor ?can be helpful.

The idea of retirement can be both exciting and terrifying. Hopefully by following these steps, you can make it more of the former and less of the latter. Are you ready??

Disclaimer:

LeaderOne Financial Corp. does not provide tax advice, Consult a tax professional for tax advice.

LeaderOne Financial Corp. does not provide financial investment advice.? Consult a professional financial planner for investment advice.

LeaderOne Financial Corp. does not provide legal advice, consult an attorney for legal advice.

LeaderOne Financial Corp. is a equal housing lender.

This material is not from HUD or FHA and has not been approved by HUD or any government agency.The reverse mortgage borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance.? The borrower must maintain the home. If the borrower does not meet these loan obligations, then the loan will need to be repaid. We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid. LeaderOne Financial Corporation is licensed by the Arizona Department of Financial Institutions. Mortgage Banker License # - 0918657.?? Corporate Headquarters: 7500 College Blvd Suite 1150; Overland Park, KS 66210, NMLS ID #12007 https://www.nmlsconsumeraccess.org .? Toll Free (800) 270-3416.? This advertisement does not constitute loan approval or a loan commitment. Loan approval and/or loan commitment is subject to final underwriting review and approval.