Retirement may seem like a far-off dream, or it may be just around the corner. Either way, it is crucial to give thought to planning for your retirement before the day arrives. Your retirement years need not be a time of lack or boredom. They can provide you with many new opportunities to enjoy life and contribute to society. Planning ahead helps to ensure you are financially secure and able to enjoy your post-retirement years. Here are eight critical decisions to consider before you retire.
8. How Your Age Affects Your Social Security Benefits
According to the Social Security Administration, you may receive retirement benefits beginning at 62 years of age. However, your benefits are decreased if you claim them before you reach full (normal) retirement age. For those born from 1937-1942, the full retirement age is 65. The full retirement age increases by year of birth, and those born after 1960 have a full retirement age of 67. Meanwhile, delaying your retirement benefits may result in retirement credits. No matter when you claim your retirement benefits, it is critical to apply for Medicare benefits within three months of turning 65.
7. When to Retire
Your social security benefits are not the only considerations when deciding the best age for your retirement. You need also take into consideration the lifestyle you envision for your retirement years. Give thought to whether you have enough savings set aside to maintain your current way of life. Think about your current health situation and consider how you can provide for yourself and loved ones if your health declines. Poor health may warrant an earlier retirement. You will also want to consider the amount of activity you are accustomed to, and whether retiring early would leave you feeling a void.
6. How to Take Your Pension
Your employer may offer a pension plan in which you and your employer contribute funds to be paid out to you upon retirement. Factors that affect your retirement benefit payouts may include your age at retirement, the number of years you spent with the employer, and your wages. Many times, you will receive larger payouts if you delay retirement past the age of 60 or 65. Therefore, it pays to look into what benefits would be available to you at various ages of retirement. Other forms of pension plans may include profit-sharing plans, stocks bonuses, and employee stock options.
5. How to Invest After Retirement
After retirement, you will want to consider whether to leave your retirement funds invested in your 401(k) plan or transfer them to an IRA. Once you are in your retirement years, you may want to avoid taking excessive risks with your nest egg. According to Kathy Kristof of Kiplinger, factors that affect your retirement investment choices include your income sources, your budget, and your tolerance for risk. Consider speaking with a financial planner to determine the best plan for your future plans and needs.
4. Decide on Your Budget
To fully prepare for retirement, sit down and work out a budget for your retirement years. Include essential expenses, such as rent, food, clothing, and healthcare. Add in required expenses such as property taxes, insurance payments, and annual car registration fees. Expenses that make life enjoyable are also important entries in your budget. These items may include club memberships, vacations, and nights out with friends or family. Once you have designed your budget, give it a test drive. Living within the strictures of your proposed budget for a year or two before retiring will help you pinpoint areas you need to tweak.
3. Choose a Medicare Plan
When thinking ahead for retirement, it may help to look at the Medicare options that are available to you at the age of 65. There are several components to Medicare coverage. Medicare Part A covers inpatient hospital stays, skilled nursing facilities, and hospice care. Meanwhile, Part B is the medical insurance component, covering doctor’s visits, outpatient, care, medical supplies, and preventive services. Including Medicare Part D in your coverage provides prescription drug coverage to some Medicare plans. You can check out your Medicare coverage options at the official U.S. Government Site for Medicare.
2. Whether to Relocate
Retirement can be an excellent time to make changes and plan new adventures. Before retiring, it is critical to give thought to where you will be living. Some individuals to continue to live happily in their current home. Others trade in a large home for one that may serve them better if stairs become difficult to navigate. You may decide that it is time to move to a warmer climate, a region with a lower cost of living, or to be nearer to loved ones. Furthermore, you may want to consider the perks of moving to a retirement community.
1. How to Fill Your Time
You will find there are many meaningful opportunities available to retirees to fill the time, provide satisfaction, and contribute to the world around you. However, retirement can seem daunting if you haven’t taken the time to decide how you will use your time. Some individuals use their retirement years as an opportunity to travel and see the world. Others learn new hobbies, seek out volunteer positions, or forge new relationships with those around them. Be thinking about new pursuits you would like to investigate and make sure your retirement budget will allow for these activities.