The Hardest Part of Retirement Planning? Schwab Points to This Key Issue

Another 38% of those surveyed said they need help picking the right age to retire. After all, your retirement age affects how much your Social Security benefits will be, whether you’ll have access to Medicare and more.

Although 65 is considered the typical retirement age, people stop working at many different times in their lives. You can determine the best age for you to retire by evaluating your anticipated retirement lifestyle, current savings, investment strategy, asset allocation and your life expectancy.

The run-up to retirement focuses on accumulating assets. Afterward, it’s about turning those assets into income, an area that 36% of participants said they need help with. Retirees may have multiple income streams including Social Security, retirement plan withdrawals, pensions, dividends, annuities and part-time employment.

To build your income plan, start with SmartAsset’s Social Security calculator, which will tell you how much you can expect to receive in retirement benefits. Next, evaluate your other anticipated income from all sources. As a benchmark, take a look at the average retiree’s income. If your total retirement income won’t cover your projected expenses, you may want to consider delaying Social Security or working part-time in retirement.

Consider speaking with a financial advisor to build an appropriate plan for your retirement income.

Spending habits change in retirement. You’ll no longer be spending on your daily commute to work and you won’t be saving in a 401(k) or other account. Healthcare and other age-related expenses, meanwhile, often go up. So, it’s no surprise that 34% of survey participants said they need help estimating their retirement expenses.

Making a retirement budget is the first step to clearing up the mystery. You can estimate expenses in retirement by projecting outlays for housing, food, transportation and other ordinary costs. But don’t forget to account for your discretionary spending, like travel and fun.

Taxes often go down in retirement, but don’t expect them to disappear – a fact recognized by 33% of those polled. To complicate matters, retirees have special concerns that younger workers don’t share, including potential taxes on RMDs and Social Security benefits.

Get a handle on retirement taxes by learning about how your Social Security benefits, retirement account withdrawals and investment earnings may be taxed. Some states don’t tax certain income sources, while others levy varying amounts of state income taxes on retirees. You may also get special treatment on property taxes when you’re retired.

Laws governing retirement savings are subject to change. Because of this, a financial move that looked smart last year may no longer make sense this year if a new law has taken effect. In fact, 30% of survey participants said they need help making sense of new laws and how they impact their retirement plans.

For example, the SECURE 2.0 Act of 2022 made a number of significant changes to the American retirement system. Most notably, the law changed the RMD age to 73 for people who turn 72 after Jan. 1, 2023. The age will eventually rise to 75. The landmark legislation will also allow people ages 60 to 63 to save an extra $10,000 in their 401(k)s – or 150% of the standard catch-up contribution, whichever is greater – beginning in 2025.

In order to reach your personal savings goal, you’ll need to control your expenses so you have enough money left over to save each month. In fact, 25% of survey respondents said they need help managing their current expenses while accounting for retirement.

There are many approaches to free up money for savings. The envelope saving method calls for stuffing cash into paper envelopes labeled with spending categories. The 50/30/20 budget, meanwhile, splits your money into three categories associated with needs, wants and debt/savings.

The Federal Reserve reports that 60% of Americans either think their savings are not on track or aren’t sure. That contrasts with Schwab’s finding that just 25% of those surveyed want help catching up on their savings goal.

About one in four Americans have no retirement savings at all, according to the Fed. The median retirement savings was $65,000 in 2019, the latest year data was collected. Catch-up contributions can help close the gap if you suspect you are behind. In 2023, the IRS allows people ages 50 and up to save an extra $7,500 in their 401(k)s or similar workplace accounts, as well as an extra $1,000 in their IRAs.

Consider using this free tool to match with a financial advisor for help planning your own retirement strategy.

A comfortable retirement is more achievable if you pay off your debts before you stop working. However, only 20% of those surveyed said that it’s something they need help with.

When you’re trying to save for retirement, paying off debt may seem like a secondary concern. However, it can make more sense to pay down debts than to invest. Deciding whether to eliminate debt or build a nest egg for retirement requires assessing concerns ranging from the psychological benefit of paying off a loan to the power of compound interest over time.

Every retirement saver is in a unique situation, which is reflected by the wide range of issues workers say they need help with. From calculating an accurate savings goal and picking when to retire, to keeping up with law changes and paying down debt, savers express a desire for assistance with a range of aspects of the retirement planning challenge.

• A financial advisor can help with your retirement questions, planning and more. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• SmartAsset’s retirement calculator is a free, quick and easy place to get an answer to the overriding question of how much you need to save for retirement. Meanwhile, SmartAsset’s Social Security calculator can help you determine when the best time might be for you to start collecting your benefits.

• Get retirement planning and investing tips Tuesdays through Fridays with the SmartMoney Minute newsletter. It’s 100% free and you can unsubscribe at any time. Sign up today.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

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