Many of us spend a great deal of time worrying about money, and rightfully so. Have you noticed Americans are living longer than ever before? Financial planning for baby boomers has taken the spotlight, and as times become leaner, retirement issues have gained a new urgency. Is it possible to convert a nest egg into a monthly stream of income that will last forever?
Rising health costs, economic volatility and longer life spans have baby boomers questioning if retirement is the best option. It’s nothing like your parent’s retirement, when everyone collected a pension and a Social Security check and the quality of living remained the same. So what should pre-retirees do? Compare your choices and decide how you want to live.
Retire Now or Double the Money?
Financial experts suggest you’ll need to have approximately 70% of your pre-retirement gross income to maintain your current standard of living. This of course will vary widely depending on your current lifestyle. Baby boomers have two options;
- Move to a retirement-friendly state where the cost of living is moderate to low and there is no income state tax
- Start a home business and reap the rewards of big tax deductions
Of course, anyone with an online masters in finance will tell you that while many expenses will decrease during retirement, many will also increase. Moving to retirement-friendly state sounds easy, yet leaving family, friends and familiar surroundings can be mentally draining. Even so, it’s still a rational choice.
Currently, only 7 states refrain from taxing their residents’ income. If you are an official resident of one of these 7 states, you don’t need to file a state tax return for that state:
- South Dakota
Choosing option A still tends to have a few pitfalls since retirees haven’t set enough aside enough money to last throughout retirement. Emergencies, medical and dental and moderate inflation is often miscalculated leaving many baby boomers living month to month. That golden goose may be hidden under a business venture.
Diversify with a Home Business.
Having a home business allows you to convert many non-deductible personal expenses into tax deductible expenses. Just the thought of starting a home business frightens many. What type of business to start? The requirements and responsibility of a home business far outweigh the benefit, right? Wrong.
Plenty of retirees consult on a number of topics and benefit from tons of tax deductions. How easy it is to qualify?
- You must ensure that the area of your home is used consistently and exclusively for business. A simple computer stand in a corner of your bedroom will suffice, as long as you consistently use that space for business
- You should run your business with the intent to produce a profit
- The costs of starting up your business at home is 100% deductible, as well as the costs to run your business
- A portion of your rent or mortgage
- Internet access
- Phone and Fax
Home based businesses can legitimately deduct $ 3,000 to $ 6,000 or more per year for the use of their personal vehicles. What you need to do is maintain a mileage log ninety days or more during the year. This mileage log must show the date, destination, purpose and main odometer readings for the start and end of each trip.
There is no reason retirees cannot live comfortably and continue their current standard of living. A few smart decisions along with pre-planning will open plenty of doors to the good life.