The average adult spends 20 years of his or her life in retirement - that’s longer than the average duration of a marriage. A significant portion of life is spent not only in retirement, but preparing for retirement as well. Unfortunately, many individuals have a dream for retirement, but fail to plan accordingly. There’s a lot to consider when thinking about your future, but with careful preparation, you can obtain your ideal retirement. Here are some tasks that should be on your pre-retirement checklist:
When you leave the workforce, you’ll probably have to make some adjustments to your insurance plan. You’re eligible to sign up for Medicare at 65, but you’ll also need a supplemental insurance plan. There are several parts to Medicare. Most people qualify to get Part A for free, which covers hospitals. With a premium, you can be covered for doctors visits with Part B and prescriptions with Part D. In addition to Medicare, you’ll need to choose a supplemental insurance plan. This can often come from an old employer or professional association.
While planning for retirement, you need to track how much you own in assets. Most experts recommend you have $1 million in assets to support a comfortable retirement. Assets include pensions, retirement accounts, and other resources. Also, don’t forget to factor in your debts when counting your assets.
After retirement, your income will become limited to pensions, Social Security, and other sources such as your 401(k). It’s crucial that you calculate your monthly income for retirement so you know how much you can spend. Factor in debts and expenses such as house or car payments, and remember to consider not only gross income but also after-tax income.
You are eligible for full Social Security benefits at full retirement age, which is usually 66. However, think of Social Security as a scale - the longer you wait to claim it, the larger your monthly check will be. You can claim Social Security benefits as early as 62, but there is a penalty, and you get a bonus if you wait (up to 70). Note that the average retirement benefit from Social Security is $1,300 month.
Once you’ve figured out your retirement income, create a cushion for unexpected expenses. From large medical bills to hefty home repairs, you need to be prepared to cover these unexpected costs. Also consider supporting grandchildren, leaving an inheritance, the impact of inflation on your plans, or the possibility of outliving your assets.
Create a budget around your income, expenses, and debt that will guide your retirement years. It’s also wise to find ways to cut expenses, including exploring smaller phone plans, reducing leisure spending, or even considering a less costly cable plan.
Don’t step into retirement blind. Craft your plan now to take smart steps for achieving your dream retirement.