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July 1, 2020
Financial planning for retirement starts sliding into home plate after 50. If you’re lucky, you’ve spent a lifetime preparing for it. You’ve maxed out your tax-deferred investment options, amassed dependable investments, curbed spending, kept debt manageable, and created a sizable nest egg to provide a comfortable retirement income.
Not everyone has that benefit, though, which can make approaching retirement more than a little scary. At age 50 and beyond, you can take advantage of catch-up contributions with your 401(k), and that can really help. If you are 50 or older, the catch-up contribution is an additional $6,500 per year.
When there’s little time left before retiring, you’ve got major decisions to make. Some of those can direct everything that you do throughout the rest of your life.
Where the last several years had everything to do with boosting savings and investments, once you’re on the verge of retirement, you’ve got other concerns. Most likely, you’ll think about whether to keep working or move ahead with plans to retire. Your expenses will dictate a lot of that.
If your savings is healthy, your house is paid off or nearly so, and your debt is relatively low, impending retirement might be the most exciting time of your life. You won’t have an expensive commute, and other usual expenses will soon dissipate, too. But if not, you have some tough decisions to make.
Where your income will cover your living expenses, you’re all set. But where it won’t, you might need to continue working, find ways to cut expenses, or even do both. Focus in on your budget. Can you trim anything back, or do you need to?
Social Security and Medicare benefits are part of many retiree’s life. You’ll probably get a small Social Security benefit, which varies depending on when you retire, and Medicare will help cover your medical costs. But there’s more to understanding how both of these systems work.
Social Security has a staggered benefit approach. If you retire at your earliest possible age of 62, you’ll always get a smaller benefit. If you wait until full retirement age, you’ll get more. And if you wait until delayed retirement age, you’ll get still more. But even at its max, the Social Security Administration says that the most anyone can receive in Social Security in 2020 is $3,790 monthly.
Medicare is a lot more complicated than Social Security. There’s Part A, Part B, and Part D. And while Part A for hospital visits is free as long as you or your spouse paid into it for 10 years, if you didn’t pay in for 10 years you might pay for coverage.
Part B is for doctor visits, and everyone pays for it. Part D covers prescriptions, and there’s a fee for it, too. There are other optional plans, such as Part F, which help fill coverage gaps.
Whether or not you have a tidy nest egg at retirement, you still might want to work at least part time. More and more retirees are not ready to leave the workforce at 62 or 65, and some never plan to retire at all.
Working in retirement isn’t always about earning more money, but it can really help make up for shortfalls. Sometimes it’s about staying active and involved in the world for a more fulfilling life. And then sometimes it’s a little of both. If you’re really concerned, talk with an advisor about a reverse mortgage, which might give you an income boost when you need it most.
Something else to consider is an annuity. Don’t let the word frighten you. Although there’s no one annuity that is right for everyone, and some have hefty drawbacks, Investopedia says there could be one that works for you. With the right annuity for your goals, you’ll never have to worry about running out of money. In some cases, payments continue for you or your spouse if one of you dies early, and in other cases, there’s money left over for heirs.
Financial planning for retirement might be winding down as you enter retirement age, but there’s still plenty left to be done. Final decisions come into sharpest focus, and so do your future income needs.
If you’ve planned, saved and invested well, that comes home to roost in the form of a secure retirement income with fewer unknowns. But if you haven’t been as fortunate, you still have options, such as delaying retirement or taking on part-time or consulting work.
NewRetirement can help you through every stage of retirement planning, including living life itself. Get retirement answers to even your most difficult questions from experts who can help you transition smoothly into your new lifestyle.
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