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Retirement Planning: One Retirement before Another February 20, 2009

Posted by retirementwithaplan in retirement.
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I mentioned in the previous blog entry on this subject of retirement planning that should not be separated and one that concerned itself with the The Perfectly Engineered Retirement Plan that this is actually a joint effort. 021809_cp_l_img_odExcept when you retire before your significant other.

I made a tongue-in-cheek comment about repairing the retirement nest or learning to cook dinner for the working spouse and some of you should, but the time spent before they join you in retirement is also a financial windfall or, in some case, a missed opportunity.

A couple of things make this a significant opportunity that may be too good to pass up and, in the process, give you an experience of your financial life ex-work.

Learning to Live on One Income
You may be able to begin to draw on your defined contribution plan and/or Social Security. Try not to. In all likelihood, these monies will continue to grow even if you no longer make a contribution. The lesser tax bracket might also help.

If you do begin to withdraw from your 401(k) or IRA, take no more than 4%. If things remain adequate over the long-term (optimistic returns, such as those given from early 2008 and before are no longer calculable – better to assume for mediocre returns and be pleasantly surprised if they are better than expected), that should give you enough to live on. If not, this is the percentage most suggest that will afford you the opportunity to never run out of retirement money.

Take your Social Security withdraw and save it. Find an interest bearing account and live off the interest. When you are eligible for the full benefit, pay it all back (there is paperwork) and you can get the full benefit – and you received some income from the cash over the course of six or seven years.

Pensions offer a provision that allows you to provide for your spouse (usually half of the full benefit) after you die. But if you can see that this would be not worth doing (your spouse is continuing to work and invest in her retirement plan, the house is more or less paid for, your health is good and you plan on doing some work), take the full amount and save a third of it for your spouse. It gives you good money that you can invest instead of your pension.

Before retiring, you should consider which of you has the better health coverage and which of you is willing to keep on working to get it.

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