Are you concerned that your retirement savings won't last? You're certainly not alone. A 2013…
Are you ready for retirement? While working forever might make the most sense financially, most people want to call it quits at some point and enjoy the things they really like to do. Here are some things you must do before you can safely leave the working world behind.
1. Calculate your Social Security benefit. For many retirees, Social Security is a significant part of their retirement income. If that’s you, then you will want to know how much your benefit will be, and whether it’s advantageous to you to delay and collect a higher benefit later. The Social Security Administration has online calculators to help you estimate your benefit. There is also a calculator that accesses your earnings history to give a more detailed figure, and a collection of other calculators that help you determine how your benefit changes if you retire earlier or later, and even estimate your life expectancy.
2. Decide what you will do in retirement. A lot of people neglect this crucial step. Sure, dropping out of the daily grind seems like a pleasant dream, but do you know what you will do after that? Many people who have worked for most of their adult lives are lost when they no longer have a workplace to go to. Having a concrete plan for retirement not only makes retirement more satisfying, it helps you know how much savings you will need. Your retirement savings may be more or less depending on whether you plan to travel the world and visit relatives, or stay at home and tend to the garden.
3. Ensure you will have enough income. Once you have decided how you plan to spend your golden years, you’ll need to figure out how to pay for it. Figure your current expenses that will continue into retirement, such as food, cable television, and cell phone.
Some expenses may decrease; for example you may spend less on gas and laundry cleaning bills since you’re no longer working. Others may increase; for example you may be traveling more than before. Then figure your pensions, Social Security benefit, and personal savings. Determine how much income you could get from your personal savings and assets, such as by purchasing an annuity or reverse mortgage.
If the expense total is higher than the income total, you may have to consider working longer or taking a part-time job in retirement. Many active retirees want to be employed part-time, to supplement their savings and also to remain productive.
4. Have an emergency fund. This is a good idea for anyone, but especially retirees. An emergency cash fund of three to six months of expenses provides a cushion against life’s unexpected contingencies, such as an emergency home repair, a new vehicle, or a trip you need to take. When you’re still working, you can make up for these from future earnings, but a major unanticipated expense while in retirement can seriously derail your plans.
5. Don’t forget healthcare. Healthcare becomes a more important consideration for many people as they age. If you retire before you are eligible for Medicare, you will need to consider how you will meet any medical needs that come up in the meantime. If you do not have retiree health insurance through your employer, you will need to purchase private health insurance. Even after you turn age 65, Medicare will not cover all of your health expenses, so you will need to devote funds to co-pays, premiums, and supplements.