As with any stage in life, preparing for retirement – or, if you’re already there, ensuring you can continue to maintain the standard of living you’ve worked hard to achieve – requires careful planning and a sound understanding of the factors that influence it. Here are 10 of the most important things you should know about retirement income planning.
In the Retirement “Zone”
If you’re in the retirement “zone,” that is, if you plan to transition into retirement in the next five years, you might want to consider that:
1. There’s no “right” time to retire. But, depending on your circumstances, there may very well be a wrong one. While your financial health is one of the key factors in deciding when to make the transition, issues such as your emotional readiness to leave your career behind and how realistic your retirement goals are must also be taken into consideration.
2. The longer the retirement period you plan for, the greater the potential that inflation will eat away at your purchasing power. That means the earlier you retire, the more important it is to account for inflation in your overall plan.
3. You’re not going to be eligible for Medicare until you turn 65. Unless your employer provides retiree health benefits or you have coverage under your spouse’s plan, you’ll need to calculate the cost of paying for insurance or healthcare out of pocket until you reach 65.
4. Social Security should only be part – not all – of your retirement income plan. While more than 90% of American workers plan to rely on Social Security, at least in part, during retirement, on average it only accounts for around 44% of a retiree’s monthly income.
5. Delaying Social Security benefits will allow you to receive higher payments. While you’re eligible to begin taking Social Security benefit at age 62, if you’re able – and willing – to put off doing so, your annual benefit will be higher. Depending on your situation, a part-time job during retirement could help you take advantage of this strategy.
In Retirement Already – Living the Dream
If you’re already retired, it’s important to withdraw your retirement income wisely to ensure you’re striking a balance between preserving your principal and maintaining your desired standard of living. So, it’s important to establish:
6. Realistic income needs throughout your retirement years
7. All of the sources of income available, including inheritances, pensions, Social Security, part-time wages, etc.
8. Contingency planning for major expenses such as long-term care costs, which can dramatically affect your retirement plans
9. Which accounts you will access first, as well as potential tax consequences of withdrawing funds from them
10. Your legacy plans, such as determining whether and how to leave money to family members, charitable organizations, etc.
Of course, there’s much more to retirement-income planning than just knowing the facts. It’s important to understand how they relate to your unique situation and goals, which means you need the right tools, advice and plan to help get you on your way – or, if you’re retired and are facing concerns, getting you back on track.
This section of our website features a wealth of information on planning for the next major step in your life, as well as numerous calculators and other tools to help you determine how much you should be saving and what taxes and required distributions might mean for your retirement plan.
For more information about retirement-income planning, please contact us.