After decades of hard work, it’s tempting to reach towards your retirement years a little early. But don’t quit your job just yet. There’s a lot to consider when debating retirement, and with people living longer than ever, you really want to be sure you’re ready before you pull the trigger. It’s a lot easier to stay working, than it is to go back. Below are some questions to ask yourself before you hang up that briefcase.
What Does Your Retirement Income Look Like?
It’s true that you won’t have a company paycheck anymore, but you will still have regular income. This money comes from a variety of resources: social security benefits, 401k or IRA plans, savings from your own accounts, and if you have any investments that generate cash flow. So, compile all these sources and determine what your monthly income will be. To find this information, check your social security statement – it guides you to determine your retirement benefits based on retirement age. Next, look at your savings. The universal benchmark for savings income is 3.5%, so divide your savings by .035 to see what you’ll get per month. For other investments, do the same kind of math. Think about if you’ll hold onto these money-making ventures, or if you’ll release, and if so, what the money will look like for every scenario. Then, add it all up. Now you have your retirement monthly income number. Is it enough?
How to Deal with Social Security?
Social security is a double edged sword – if you take money out of social security too early, then you get penalized, but if you wait too long, you could lose credits. So when do you act? There are many individual factors to consider, but the basic information is this: the minimum withdrawal age is 62, so taking benefits before this age will cost you (although it’s an option if you must). Before age 70, but after 62, you get delayed retirement credits, which is extra money that you can use later in life. The catch is, after age 70, you don’t get the credits anymore. So, 62 to 70 is the most popular window to retrieve benefits. If you can wait, it’s a good idea, particularly for individuals who are healthy and have a long retirement ahead of them.
Do you Know how to Deal with Post-Retirement Healthcare?
There isn’t much more complicated that retirement health. Not only do you need more physical maintenance in your later years, but you have Medicare, Medicaid, and traditional insurance to tend to, as well. It’s a whole new ballgame, and, unfortunately, it’s a lot more expensive than it was in your working years. For one, you should budget a significant amount of retirement expenses to medical needs. The good news is that while you do need long-term medical insurance in addition to all the government supported care, if you sign up while you’re still working, you’ll get in at a lower rate than if you set this up after you retire. You shouldn’t be without insurance, ever (you’ll even get fined for it!), but here’s even more incentive to get yourself organized before you leave the company policy.
What are Your Investment Plans in Retirement?
When we work, we generate as much cash as possible. We’re saving, we’re paying off debt, and we’re making risky investments because there is more money to be made if the risk doesn’t pay out. But in retirement, it’s about preserving what we’ve already set up. You want to maintain more than add, now. That affects your investment strategies. Most retirees move from stocks to bonds. This makes sense. Bonds are less risky because they aren’t as volatile as stocks, and they provide a more predictable income. Still, it’s a good idea to keep a foot in the stock market. Your portfolio will stay diverse, always sound investment advice, and you’ll likely make more money than if your money was resting in bonds. The rule of thumb is to subtract your age from 110, and that number is how much of your investments is in stocks. The rest should go to bonds.