In a Federal Reserve reporton the economic well-being of U.S. households, 51 percent of those surveyed ages 55 to 64 planned to keep working (either full- or part-time) after traditional retirement age. According to research from the Kauffman Foundation, nearly 25 percent of people ages 55 to 64 started companies in 2012; that’s up from 14 percent in 1996. If you aim to forego retirement, put a plan in place for managing your nest egg and consider these factors:
If you’re part of an employer plan and still working for that employer, you don’t need to take a distribution at 70.5 years of age and older (as long as you remain actively employed). But, you do have to take required minimum distributions (RMD) from your other qualified accounts (e.g., plans from former employers, as well as IRAs).
Here are some thoughts for managing what you don’t have to take as a required distribution:
1) Manage your money for the eventual beneficiary of your nest egg. For example, if you’re age 70 and working full-time and want to leave your money to your teen granddaughter, you could take a more aggressive approach. That’s because there’s plenty of time for the money to recover from downturns in the market.
2) Manage what you’ve saved based on your age. Regardless of how you intend to use your money, you could increasingly limit your investment’s exposure to risk. In other words, play it very safe but sacrifice some returns.
3) Consider one spouse retiring and the other not. You may need to develop two, separate financial plans in this case. But there could be a common source of funding for both plans.
4) Manage 50 percent of your retirement account for growth (even aggressive growth) and manage the other half conservatively. You benefit from the growth potential of the markets with a long-term mentality. You also shield the other half of your assets from some volatility, which is good for money earmarked for an RMD, medical reasons or an emergency.
If you don’t have a retirement plan, get started today. And even if you have a plan in place, review the performance of your plan two or three times per year to ensure it’s taking you where you want to go.
Please send me your questions or comments at [email protected].