Planning your retirement? Here is a short task list to complete before you skip out the door that will help with your finances. These should be done in partnership with a financial planner to eliminate any mis-steps that could have far reaching consequences.
Create An Asset Allocation Strategy You are Comfortable With. Spreading your investments in your retirement accounts in a variety of holdings will help you deal with the ups and downs of the stock and bond market, and keep your savings somewhat stable. Traditional investment strategies suggest that the younger you are, the more risk you can absorb. Those who are preparing for retirement should consider shifting to a more conservative mix. Many financial planners are suggesting target-date mutual funds, based upon age group, which gradually get more conservative as the investor gets closer to retirement. It also is important to remember that your money may have to last 25 – 30 years, so it is important that the allocation strategy is not too conservative as you move into retirement. You will need to keep up with inflation.
Only you know what you are comfortable with, so talk to your financial planner. Trust yourself to make the decisions right for you.
Plan Your Income Stream. Before you stop working, determine how much money you will take each year from your retirement accounts and Social Security. Some financial planners recommend you take only 4% of your retirement funds each year, with a 3% increase each year to cover inflation. However, in current economic conditions, you should consider putting off dipping into your investments until the market has recovered to some extent, or reduce your withdrawals below the 4% level. You also have no need, at this point, to increase the withdrawal until inflation is once again positive.
Social Security minimum age is age 62. If you can afford to wait until full retirement age (people born between 1943 and 1954, age 66), you will receive an “delayed retirement credit” that adds 8% to your benefits each year until age 70. If you go online, you can download the Social Security Administrations retirement planner to figure out when you want to start receiving your benefits.
Eliminate Debt. Pay off those credit cards before you retire! If you can’t pay those balances at the end of the month while you are earning a steady pay-check, it is unlikely you will be able to pay them off once you retire. Tackle those with the highest interest rates first. Some suggest transferring those balances to low-interest cards so that more of your money is going toward the principal amount owed than to interest charges.
Pay off your mortgage before you leave your 40 hour a week job. This is, for the most part, your single largest bill. Another option is to decide whether you want to downsize or move to a more cost-effective location to boost your retirement nest egg.
Lifestyle Makeover. Simplify your life. Cut back on expenses, and stick with a budget. If you have been in your house for long enough, consider selling your familial home for an empty-nester home, or even moving to a more affordable part of the country.
Other ways to simplify and cut costs: buy a more economical car, own one car rather than two, delay an expensive vacation until the stock market has recovered a bit more (a $10,000 vacation will remove $150 from your monthly income stream). Grow a garden, eliminating some grocery expenses. You will eat better food and get some exercise!
Sign Up for Medicare. Health care is becoming one of the biggest expenses we are facing. First, check to see if your employer offers retiree health benefits or if supplemental insurance will be necessary. Next, become familiar with the rules for Medicare, including when you need to sign up. Some basic facts you need to know: Medicare open enrollment starts three months before you turn 65 and ends three months after your 65th birthday. If you miss the six-month window, you will go without coverage until the following general enrollment period of Jan 1 through Mar 31 of the next year. The exception is for people still working full time and are on their employer’s health plan. Their enrollment period starts as soon as they officially terminate employment. Also, take note that Medicare does not cover dental expenses.
Buy Long-Term-Care Insurance. The biggest threat to your retirement finances is, by far, an extended stay in a long-term-care facility. I have read that an average nursing home costs between $55,000 and $75,000 a year. If you are over 50, the premiums are relatively expensive. If you can afford them, the premiums are worth it. Your spouse will still have funds to live on, and your children will not have to deal with issues around where to put Mom or Dad if they fall ill. Some important benefits to consider include inflation protection and the freedom to hire home health-care so you can remain in your own home.
Georgia Feiste, owner of Collaborative Transitions, located in Lincoln, NE, is a business, career and personal life coach, writer, and workshop facilitator. Her passion is helping individuals accomplish what they want in life based on their standards of integrity and priorities in life. She provides support and encouragement as her clients set goals to attain their desires, holding open the space they need to stretch and grow. Georgia currently writes columns for the Lincoln 55+ Senior Newspaper. Her website is http://www.collaborativetransitions.com
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