LaShonda Debrew | CPA Upper Marlboro Maryland CPA LaShonda DeBrew
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Maryland Retirement Planning

by La'Shonda DeBrew on October 13, 2013

 

Maryland Retirement PlanningMany people have a very idealistic view of retirement, and unfortunately, Maryland retirement planning is no different. Many Maryland residents fail to take the time to begin planning for this stage in their life. It is easy to dream about all the exciting things that you can do when you retire. However, it is essential to focus on retirement planning early or you may not have enough income to support yourself when you are ready to retire. As you begin planning, you need to consider a variety of different factors, such as the fact that Social Security benefits may be cut in future years or the fact that people are living longer than before, adding additional years to your retirement. The good news is that there are many excellent resources and tools available to make planning easier than ever. If you’re ready to begin planning to retire in the state of Maryland, the following information will help guide you through the planning process so you can enjoy your retirement in the future.

Maryland Retirement Planning – Basic Considerations

When you begin your Maryland Retirement planning, every resident needs to remember a few basic considerations. First, it is a good idea to figure out your income needs when you retire. When trying to figure out your income needs for this time, it is a good rule of thumb to plan to have 60-90% of your current income each year. Of course, this generalization may not account for your unique situation. One of the best ways to figure out the annual income you’ll need in retirement is to use a retirement calculators. While these calculators are not perfect, they can help you predict how much you will need to retire comfortably, based upon your specific situation.

Another basic consideration is to calculate how much you need to save before you retire to ensure you have enough money to provide the annual income you need. To figure out how much you need to save, consider your life expectancy, the age when you plan to retire and the rate of growth expected from savings and retirement funds you may be putting away. Once you know your income needs and the amount you need to save, you will be better prepared to meet your goals for Maryland Retirement Planning.

How to Figure Out Income Needs for Retirement

While Maryland residents need to begin by considering their income needs and deciding how much to save, you may be wondering how you can figure out how much income is needed to fund a comfortable retirement. Here are a few steps that can help you get a good idea of your overall income needs, although even the best Maryland Retirement planning cannot account for every event you may encounter once you retire.

  • Step #1 – Start with Your Current IncomeTo figure out your future income needs, start by looking at your current income. Looking at your current income helps give you a figure that will allow you to sustain your current lifestyle. However, remember that you will not be liable for some expenses you face now, such as payroll taxes. This means that you may not need as much money as you need now to keep up your lifestyle.
  • Step #2 – Figure Out Expenses for Maryland Retirement Planning: When deciding how much money you’ll need annually during retirement, you need to carefully figure out your yearly expenses. This is an important part of Maryland retirement planning. Some of the expenses you’ll need to figure into your final number include the following:
  1. Utilities like cable, water, electric and gas
  2. Clothing and food
  3. Insurance costs
  4. Housing – Property taxes, property repairs, mortgage payment or rent payment
  5. Taxes
  6. Investments and savings
  7. Transportation costs
  8. Education costs
  9. Recreation costs, such as hobbies, dining out and traveling
  10. Miscellaneous expenses – Personal care items, pets, memberships etc.
  • Step #3 – Estimate How Long You Will Live:  The length of time you live will affect your retirement income needs. It is possible to find online calculators that will help you estimate your life expectancy using different factors like health, age, lifestyle, gender and race. While these are only estimates, they can help you plan for the total amount of money you may need to have when you retire.
  • Step #4 – Determine a Retirement Age: To figure out how much money you will need to retire, you have to know how long you will be retired. This includes an estimate of how long you will live, but also will be based upon when you decide to retire as well.

Maryland Retirement Planning and Health Insurance

Healthcare is always a priority, but many Maryland residents forget to consider how they will ensure they have coverage once they retire. While you want to stay healthy, you will always need checkups and preventative care. As you grow older, it is possible that you will experience a decline in health as well. This means you could require medical treatments or prescription medications that are costly. For this reason, it is essential to make sure you will have health insurance after retiring.

If you wait until you are 65 to retire, you may be eligible for some Medicare health benefits. However, if you retire before age 65, you may have to fund your own healthcare. Many employers do not provide health insurance benefits to employees that retire, so you may need to go through COBRA to extend your previous coverage or you may have to purchase a private policy of your own. Even if you are eligible for Medicare, that probably will not cover all your medical needs, so it is important to look for other ways to cover medical expenses after retirement, such as a Medigap policy.

Save for Maryland Retirement Planning with 401K Plan

One of the most common ways that individuals can save for retirement today is to have a 401k plan. These are employer-sponsored plans that are extremely popular and allow you to defer part of your wages and have them put in your 401k. The amount deferred and put into this account is not considered your part of your income, since it is paid with pretax money, reducing the amount of taxable income you have each year. You will not be taxed on your 401k and its earnings until you begin to receive payments from it. The reason it is such a popular Maryland retirement planning tool for many residents is that many Maryland employers will match the contribution you make to this plan. Many employers will match as much as 50 cents on the dollar for a certain percentage of the money you save. If you are not contributing the yearly maximum to your account, it is important to start contributing as much as possible so you can save more towards your retirement in the feature.

IRAs and Maryland Retirement Planning

As you consider your options for Maryland retirement planning, IRAs are another great option to consider. Even if you already have a 401k plan in place, you can also have an IRA. You can have money taken from your paycheck and added to an IRA as well. Keep in mind, certain types of IRAs have different tax advantages, so it is important to talk to a good financial planner to find out which type of IRA will work best for your needs.

More than likely, you will spend quite a few years retired and you want to make sure that this time in your life is enjoyable and comfortable financially. Taking the time to plan in advance makes a huge difference. Even if you have done little to begin your Maryland Retirement Planning, you can get started today.

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