Reassess Your Retirement Plan
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 other benefits.Make sure you know exactly how much you can expect from 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, do you plan on still working? Be aware that those under full retirement age for Social Security purposes will lose $1 of benefits for every $2 of earnings over $17,040 in 2018. Make sure you understand your distribution options for any defined-benefit plans. 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’ll 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 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 healthcare insurance and long-term-care costs. Two of the most significant costs in retirement are medical 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 years before retirement. If you can do so without increasing your debt, you can be reasonably confident your budget will work during retirement.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.