Since I am thinking about retirement myself, I thought I would explore some important questions that should
receive a response before the big day arrives.
Question 1: At what age do I plan to retire?
There is a lot of curiosity about the ideal age to retire, but the answer is different for everyone and determined by several factors. There is no “one size fits all” formula for making this decision. Age, desired lifestyle, years of service with your employer, and whether or not you plan to collect Social Security to support yourself financially should all be considered.
The sooner you start planning for retirement, the more likely you are to be able to retire financially. You can also retire earlier. If you plan to depend on Social Security income, your age will play a bigger role in when you can retire.
Question 2: Where will my retirement income come from?
There are several sources of income that can be used for retirement purposes. One is social security. Social Security is a federally administered insurance program that provides benefits to many U.S. retirees, their survivors, and disabled workers. It is the most common type of income on which retirees depend. The Social Security Administration provides a quarterly statement of your payments in the system or you can visit the website to set up an account to track your payments and the estimated amount of your monthly benefits. For more information on Social Security income, you can visit: www.ssa.gov.
Another source of income for retirees is the 401K which is usually accessible through your employer. A 401 (k) plan is a qualified retirement plan, which allows employees to save a portion of their salary in a tax-efficient manner. You can invest part of your salary up to an annual limit. Your employer may or may not match part of your contribution. If your employer offers a matchmaking program, take advantage of this option. This is called “free money” and is usually offered as a matched percentage. The money will be invested for your retirement, usually in a variety of mutual funds that you choose, or the choices can be made by an investment company. You generally cannot withdraw money without a tax penalty until you are 59 and a half years old. This factor can also be attributed to the age issue that we talked about earlier.
Question 3: When do I plan to take Social Security benefits?
The full retirement age is 66 if you were born 1943 to 1954. The full retirement age increases gradually if you are born 1955 to 1960 until you are 67. For anyone born in 1960 or later, the full retirement pension is payable at age 67. If you plan to take advantage of these benefits, you must apply four months before you want your Social Security retirement benefits to begin. If you want your benefits to start at 62, you can apply at 61 years and 9 months.
Question 4: Will you stay in your current accommodation, downsize or move?
Again, this is an important decision that deserves careful consideration. Do you really need the same living space? Will it be to your advantage to move to a smaller house or apartment to save on monthly living expenses, or will you decide to move out of state or be closer to your children? All of these questions can have a major impact on when to retire.
Question 5: What are my medical needs, future and present?
Your current health condition and possible future illnesses, long-term care and other health issues should be taken into account. Medical expenses during retirement years can get quite high if you haven’t purchased insurance or saved enough to cover basic health care needs. According to a Fidelity article, “An average retired couple aged 65 in 2021 may need around $ 300,000 in savings (after tax) to cover health care expenses in retirement. How much you need will depend on when and where you retire, your health, and how long you live. Medicare / Medicaid enrollment can lower your costs, but you may also need to purchase additional insurance to cover expenses not paid by these plans.
Retirement is an important stage in your life and with careful financial planning you can successfully navigate this space armed with information that can help you make this important decision.
For more information on this and other financial matters, you can contact me at Charlestien.firstname.lastname@example.org or 662-624-5776.
Until next week, stay in shape financially!