Are you thinking about retiring? Have you decided that it is time to rest and stop going to work every day? Maybe, you are getting older and it is time to move on to the next phase of your life. Whatever the reason is, retirement is not easy and it requires a lot of planning on your part. The whole point of retirement is to save yourself from the exhausting hardships of life. This is why you should really think long and hard before you retire and follow these tips. This article will tell you the “in’s and out’s” of retirement and how you can make the most of it.
Planning To Retire? Consider These Things First
If you are planning on retiring, then you deserve to spend your retired years while you are financially secure. Of course, there is no guarantee for that. But, you can try your hardest to achieve financial security. Typically, your Social Security will not cover enough money for your needs, at least without additional income. However, there are things that you can consider before retiring. These six components will make the retirement process easier for you. Also, you will not be unprepared for retirement. Make sure you keep these six components in mind when you are planning for retirement. You will not regret it.
How Much Money You Will Have to Spend
The first thing you should do is find out how much money you will have to spend during retirement. With retirement savings and investments, you should find out how the money will be distributed. Will the money be distributed on a monthly basis or a yearly basis? You should also find out the percentage of the investment portfolio that you will withdraw annually. If you’re considering Social Security, then you should find out the estimate for retirement benefits. You can always register with the Social Security Administration to understand retirement benefits. Finally, you should take into account pension and other retirement benefits that are meant for you and your spouse.
Make Sure That You Diversified Your Investment Portfolio
A lot of people think about avoiding stocks due to the risk that comes along with them. However, when people properly manage stocks before their retirement they may be able to see a benefit. That is why you may want to consider maintaining a healthy combination of stocks, bonds, and other investments. Just make sure that the investment fits your current financial situation and your liquidity needs. If you have a well-balanced investment portfolio, then you have a better chance at enduring any downfalls and even generating income. The income you generate will help you cover your essential expenses during retirement. However, you should make sure that your investment portfolio is coordinated with your retirement plan.
Reduce Your Debt to Zero Dollars (Or At Least, the Bare Minimum)
One of the main things that you need to work on is your debt. You need to make sure that your debt is reduced to a bare minimum. If you have no debt piled up, then that is even better! You should consider speeding up your mortgage payments. That way you can pay off your loan before you retire. Also, you should avoid creating new credit card debt. To do that, you can always start paying cash. If you limit your new debt and reduce your existing debt, then you can minimize the amount you spend on interest payments. Before you retire, you should make sure that your debt is not tying you down.
Assess Your Retirement Income As Accurately As You Can
You should estimate how much you will get from all income sources you have. This includes your Social Security benefits and your employee pensions. Typically, most of your retirement funds will come from your savings, investment accounts, and other wages that you earned in retirement. You could even find that most of your retirement funds come from your wages! A general rule of thumb is that you can afford to spend four percent of your investment portfolio annually in retirement. Of course, that does not apply to everyone. You should also put the withdrawal rate based on your situation. You might need more and you might need less.
Think About Where You Will Live After Retirement
When it comes to retirement, you should know that your expenses will be significantly impacted. If you decide to sell your home that is located in an expensive location and move to a cheaper low-tax state, then your expenses will significantly decrease. Of course, you can stay in your town or city. But, you can always move to a smaller home that will help you manage your finances better. On the other hand, if you decide to live somewhere with high living costs and taxes, then you will find that your expenses will skyrocket. You should consider where you live when you retire, since it will definitely affect your expenses.
Consider Future Medical Costs
If you decide to retire at the age of 65 or older, then you are in luck! Medicare will cover most of your routine healthcare costs. However, you should not only rely on Medicare for healthcare. There is a possibility that something will come up, health-wise, and Medicare will not cover it. This is why you should consider supplemental coverage. Additionally, Medicare does not cover long-term healthcare costs, which are essential at a certain age. To protect your retirement, you should think about buying long-term care insurance, which can help cover for home healthcare services. You should take into consideration future medical costs.
Retirement Hacks to Save Your Life
Now that you know what you should consider before you retire, it is time that you follow through with these three retirement hacks. We can assure you that they will make your retired life easier and you will feel ready for the next phase of your life. You will need to claim all of your social security benefits, fund a health-saving account, and save your wage increases to your retirement fund.
Claim All of Your Social Security Benefits
Social Security benefits will help you make ends meet when you are retired. But, you cannot rely on only your Social Security benefits (at least, not just one form of Social Security benefits). In addition to the standard retirement benefits, you can also apply for spousal benefits, divorce benefits, and\or survivor benefits. If you are married to someone who can qualify for Social Security benefits, then you can also apply for spousal benefits. The maximum amount that you can earn is 50% of the amount your spouse will receive at their retirement age.
As for divorce benefits, the same rules apply as spousal benefits. The only difference is that you can receive Social Security benefits from your ex-spouse. However, you must have been married for 10 years and you cannot currently be married, as well. For survival benefits, it applies only if your loved one has passed away. These benefits are available to widows, but sometimes other family members can claim the benefits as well.
Fund a Health-Saving Account With Your Retirement Plan
You should fund a health-saving account on top of your retirement plan. This way you can withdraw the funds for medical costs after you retire. It is pretty simple; all you have to do is contribute funds to your Health-Saving Account throughout your career. Then, after you retire, you can use that money to cover any healthcare expenses that come your way.
Save Your Increases Towards Retirement
Throughout your career, you will probably receive an increase or two. (Maybe even a bonus here and there!) In that case, you should consider adding your raise to your retirement plan. You already live off of your current wages so you will not feel a difference if you do not spend your raise. Think about the future, retired you and how happy they would be because of this little sacrifice.
