To retire or not to retire ... yet

To retire or not to retire ... yet

Retirement may have once looked far off in the distant future, out there somewhere in a foggy land too remote to think much about.

But whether you are ready to step immediately onto the retirement stage or whether you are waiting a few more years to make your ?debut,? here are a few things to think about as you make these very important financial decisions.

Keeping your balance

A balanced portfolio is essential to planning at whatever stage in life you find yourself.

One of the most common pitfalls in this most recent downturn was that the previous growth in the stock market left many portfolios over-weighted in stock. When the market collapsed, the losses were unexpectedly painful.

Many financial advisors counsel that taking the year of your age and subtracting it from 100 is a good rule of thumb for the portion of your portfolio that should reasonably be held in stock.

At age 40, with decades until you retire, a more aggressive portfolio stock mix of 60 percent might be appropriate. At age 60, 40 percent in stocks will still give you some growth potential with a balance shifting to the stability provided by bonds.

At age 80, perhaps 20 percent of your portfolio could remain in stocks, keeping your exposure to market ups and downs to a minimum.

Once you and your financial adviser determine the right mix of stocks, bonds, real estate or other investment instruments and cash, the important thing is to rebalance at least annually in order to avoid increasing your risk in one segment or another.

Is it time to retire?

Determining when to retire and when to begin taking Social Security is one of the most important decisions to be made in a lifetime.

The Social Security Administration can assist by providing information about what your benefits will be depending on what age you decide to begin receiving your payments.

You receive your largest benefit by delaying Social Security payments until age 70, so it never makes sense to wait past that age.

For benefits purposes, the Social Security Administration defines ?normal retirement age? (NRA) as between 66 and 67 for people born in 1943 or later. If you start receiving benefits earlier, your monthly check will be permanently reduced. (You may get a cost of living increase in some years, but these are generally modest.)

There is one exception: If you elect to receive early Social Security benefits at a reduced rate, you have the option of starting them at a higher amount if you repay what you have already received. (In a way, this is like an interest-free loan.)

Many Web sites have Social Security calculators that can help you assess different retirement options to determine which scenario might work best for you


IRAs vs Social Security

Whether to begin withdrawing from your IRA or taking Social Security first depends on many factors. The higher the return you are earning on your IRAs, the more sense it makes to let that money continue to work for you and take Social Security early.

Which to tap first will depend on a series of factors and circumstances ? your life expectancy, for one.

Insurance actuarial tables can give you some idea how long you may live, and your own family history tells a story as well. If several generations of your ancestors have lived into their 90s, count yourself lucky.

All these factors should be taken into account as you make your decisions about retirement.

Keep an eye on inflation

Don?t forget to think about inflation ? 3 percent annually is fairly standard. This inflation rate can quickly cut into a payment amount that may sound generous today but could be woefully lacking in 10 years.

The key here is looking ahead. Most of us are caught in the now.

A few more years of work and savings could make a tremendous difference between simply an adequate retirement and one that feels more secure.

Social Security & Taxes

One seemingly dirty trick is the fact that your Social Security payments will be taxed as income. What you will pay back to Uncle Sam in taxes depends on your income tax bracket.

As a single head of household, Social Security income below $25,000 is tax-free. Between $25,000 and $34,000, up to 50 percent of your Social Security benefits could be taxed. If you make more than $34,000, up to 85 percent of your benefits may be taxable.

For a married couple filing jointly, below $32,000 is tax free. $32,000 to $44,000 puts you in the 50 percent taxable range; and above $44,000 in the highest tax bracket of 85 percent.

For more information on federal income tax rules for Social Security, request IRS Publication 915, ?Social Security Benefits and Equivalent Railroad Retirement Benefits,? available at

Take your time to decide

Your personal and financial circumstances are unique. Don?t feel that you have to go it alone. To make sure you don?t make an obvious mistake or overlook any clear opportunities, secure the help of a professional financial adviser or certified public accountant, someone who can talk you through your options and help you understand the ramifications of your choices.

You may need to consult both a financial planner and a tax specialist in order to see the whole picture. There are many qualified planners in the Columbia-Pacific region. Ask people you trust to recommend someone and ? as you would in the case of an important medical decision ? get several opinions.

Once you find the right planning adviser, don?t be afraid to ask questions until you clearly understand the impacts of the various options you have. It is your time to stand in the spotlight and to reap the benefits of your life of work. Get help, do your research and make your move when the timing is right for you.

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