As the clock ticks toward retirement, it dawns on us that we must make many financial decisions. Failure to do so could mean missing out on the freedom we’ve been dreaming about for so long. If the window at your workplace is closing fast, consider making Legacy Private Trust your go-to partner for all your financial and retirement planning needs.
In the meantime, do you know the decisions you need to make? Let’s look at the key aspects you should consider to ensure you’re comfortable once you hang up the work boots.
1. Maximize Your Retirement Accounts
What’s your 401(k) maximum allowed contribution? Take full advantage of that limit for greater retirement savings. Most likely, your employer will match your contribution to a certain percentage. Hence, it makes sense to make the most of the free money.
Labor laws allow people over 50 to make higher catch-up contributions. Check with your plan administrator to determine if your retirement plan allows this.
Account consolidation might also be feasible if retirement is right around the corner. This may entail combining 401(k)s, IRAs, and other retirement accounts, which could simplify the management of your investments.
2. Estimate Your Retirement Income
Social Security is a crucial component of retirement income for most seniors. Hence, it pays to understand the benefits you’re entitled to and how you can maximize them.
You can claim Social Security benefits when you retire, usually between ages 65 and 67. However, you’re entitled to start claiming benefits as early as 62, but it won’t be the full amount due. If you wait until after full retirement age, your benefits will increase.
The idea is to figure out how much you can expect as retirement income, so you know whether it’ll be enough to cover your expenses. Tap into the retirement calculators available online to help you figure out how much you can expect from Social Security benefits, pension, investments – you name it. A financial planner can also help you determine how much you’ll need for a comfortable lifestyle in retirement. If you are recently widowed and would like to have financial security, consult a fiduciary advisor who can assist you with retirement planning for widows.
3. Plan for Healthcare Expenses
Healthcare is a major expense during retirement, given that health concerns tend to increase with age. If you haven’t already, sign up for Medicare Part A and B at 65. This will cover hospitalization, home health care, hospice, doctor visits, and other medical expenses.
If your retirement income isn’t enough to cover healthcare costs, consider enrolling in a Medicare Supplemental Insurance plan. Review the available plans with a knowledgeable professional’s help so you can make the right choice. And to reduce costs:
- Plan for elective procedures covered by Medicare while you’re still employed so you can take full advantage of your current coverage.
- If your employer provides a flexible spending account (FSA), consider using it to pay for medical or dental expenses tax-free.
- Take every available financial opportunity to safeguard your health before retirement.
4. Reduce Your Debt
Who wants to be saddled with debt when they don’t have a paycheck? Do you have existing debt? Well, consider downsizing it. Whether we’re referring to mortgage payments, credit card debt, auto loans, or student loans – pay it off before you retire by ramping up your payments.
You may also take on a side hustle to help you pay off debts faster. This will give you more financial flexibility and peace of mind in retirement.
Plus, it’ll free up more cash for your retirement. Plus, you’ll be better positioned to enjoy a worry-free retirement when you don’t have debt payments looming over your head. While at it, steer clear of new debt, if possible.
5. Make Living Arrangements
You’ll need to decide where you plan to live post-retirement. If you don’t own a home, consider buying one if your finances are in order. Alternatively, consider renting an apartment.
You could also downsize your current home and move into a smaller, more affordable place, preferably in a low-tax state. Or if you live in an expensive city, you can rent out your home and opt for more affordable housing elsewhere. The goal is to ensure you can afford to live comfortably and not stretch your retirement income too thin.
Retirement can provide a great opportunity to reinvent yourself or pursue a new hobby. But you need to plan so that your golden years are truly golden. Take the time to review your finances and look into resources that can help you maximize your income during retirement. Hopefully, by taking the steps mentioned above, you can secure a comfortable retirement, regardless of when you plan to do so.
