If you are thinking about retiring, there are many things you should do to ensure that you have the proper finances in place. Some of these issues include Social Security and Medicare, Health insurance, and Estate planning. Knowing about these issues will help you make sound financial decisions and make the transition as smooth as possible.
Before retiring, it is important to decide if you want to start taking Social Security benefits early or wait until the full retirement age. The decision depends on your goals. If you want to work past retirement age and receive larger benefits, you might want to withdraw your benefits sooner. If you are married, you should consider your spouse’s age, health, and retirement benefits. If you decide to take benefits early, you should make sure to have enough savings for both.
The first retirement check is usually issued to employees around the first month after retirement. This check includes an Account Detail Information sheet, which shows how your retirement benefits are calculated based on your payroll and service credit information. In addition, you will receive a Notification of Deductions letter if there have been deductions or adjustments in your account.
As you consider your retirement, make sure to consider your health coverage. If you’re under 65, you may be able to continue your employer-provided health coverage for up to 18 months after you retire. Otherwise, you must look for a new plan or apply for Medicare. Once you have a plan, you’ll need to make sure it stays current, or your coverage may expire. You’ll also need to know the terms and costs of the policy.
Make a budget. Because most retirees will be living on a fixed income, it’s essential to create a budget that will account for realistic expenses. In addition to making a budget, you’ll need to check the value of your retirement accounts and investments. It’s generally a good idea to keep withdrawal rates to around 4 percent, but you must be realistic about your expenses.
The Affordable Care Act (ACA) has created a new way to get health insurance for people who reach certain ages. However, the cost of this plan can be confusing and can dissuade some people from retiring before age 65. ACA health insurance premiums are based on a household’s projected income. However, when one is retired, their household’s income may not be very high.
Fortunately, some employers are voluntarily offering health insurance plans to departing retirees. Such plans often provide similar coverage to those for active employees. However, most employers will only subsidize 70% to 80% of the premiums, so the retiree will have to pay the remainder. The average annual premium for an employer-sponsored plan is $7,740 for single coverage, and $22,220 for family coverage.
Estate planning is an important part of retirement planning. It will allow you to name beneficiaries and ensure that your assets will pass on to them after you die. Whether you have a large estate or a modest one, it is important to plan ahead so that your beneficiaries will be protected. In addition to your will, you should also consider living trusts.
One important thing to consider before you retire is the beneficiaries of your life insurance policy. This is important since your life insurance policy or retirement account beneficiaries will receive the death benefit. You should also make sure that you have a personal balance sheet of your assets and liabilities. This includes any real estate, cars, collectibles, bank balances, and other assets. You should also establish a trust to protect your family from any financial or tax debts that might be owed on your assets.
Budgeting before retiring is critical if you want to live comfortably in retirement. You need to figure out exactly what you will need for living expenses. Start with the essentials, like your mortgage payment and electric bill. Compare those to your monthly income to figure out how much you will need. Then, you can add some fun expenses to your budget. Planning ahead will make the process much easier.
A common retirement mistake is not making a proper budget. This causes retirees to run out of money too quickly and end up outliving their savings. In order to avoid this, you should start your retirement savings plan as early as possible. As they say, “time is money.” It is important to begin saving for retirement early, and to be disciplined.