Approximately five years before you plan to retire, thoroughly reassess your retirement plans and ensure that all significant financial pieces are in place. Once you retire, you probably won’t have the option of going back to your former job. So before you retire, consider these points:
- Take a serious look at your retirement plans. You’re close enough to retirement that you should have a good feel for your retirement expenses and expected income. While you may be anxious to retire, remain flexible about your retirement date. Working an additional year or two can add substantially to your retirement savings and may boost your retirement benefits.
- Get a fix on your Social Security and pension benefits. Make sure you know exactly how much you can expect how much you can expect for Social Security and defined-benefit plans. How much will your benefits increase if you delay retirement by one year, five years, etc.? If you retire before full retirement age for Social Security purposes, earnings over $15,480 in 2014 will cause you to lose $1of benefits for every 42 of earnings over this threshold. Make sure you understand your distribution options for any defined-benefit plan. In most cases, those decisions are irrevocable, so you’ll want to take some time to assess those options.
- Determine how much income your retirement investments will generate. As a general rule of thumb, you can multiply your retirement investments by 4% to get an idea of how much you can withdraw annually. You can go through a more detailed analysis, reviewing a wide range of variables for a more precise answer. However, the younger you retire, the more conservative your withdrawals should be, since your funds will have to last for a longer time period.
- Investigate work options. If you plan to work at least part-time during retirement, have you decided what you’ll do and how much it will pay? Make sure you investigate your options, including asking your current employer about part-time opportunities after retirement.
- Finalize living arrangements. Determine whether you want to stay in your current home or move to another one, either in the same city or a different location. AT this point, you should be able to determine whether you’ll have a mortgage and how much equity you’ll have in your home. While most retirees continue to live in their current home, explore whether it makes sense to downsize, freeing up home equity for investments or retirement income.
- Deal with health insurance and long-term-care costs. Two of the most significant costs in retirement are medical care and long-term care. Make sure you have plans to deal with both. If you are retiring at age 65 or later, you’ll be eligible for Medicare, although a spouse under age 65 will not. You will probably need supplemental coverage with Medicare. If you are retiring before age 65 make sure you know exactly how much coverage will cost you, especially if coverage is not provided by your employer. Now is also a good time to take a look at long-term-care insurance, since premiums get significantly more expensive as you age.
- Live with your retirement budget for a couple of years. Want to really make sure your retirement budget is reasonable? Try living with your retirement budget for a couple of your before retirement. If you can do so without increasing your debt, you can be reasonably confident that your budget will work during retirement.
Please call if you’d like help assessing your retirement plans before you retire.
Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.