Your Financial Future: Retirees must ensure health care plans, financial needs are settled
Many people plan to retire after the beginning of the new year. They wrap up during the holiday or may lock in some benefits by working a few days in 2018.
If retirement is imminent, you must make sure that you do not make a serious mistake. You must make sure that you have a health care plan in place.
If you are under age 65 and have been covered by a company plan, you may be surprised to find out how much you will be paying each month. If you are 65 or older, you will be going on Medicare unless your spouse is still working for a company with 20 or more employees. You will have to have a plan in place to handle all of the out-of-pocket cost.
You may have to make a decision about claiming Social Security (SS). If you start before full retirement age, you will get less for life. There are many different factors to consider. Remember, you want to maximize your family’s total income. SS is one of the only retirement plan with a cost-of-living adjustment.
Not considering inflation during retirement could be a huge mistake. Many people will be retired for 20 to 25 years. If you do not plan for inflation, your purchasing power will continue to erode. You simply will see your standard of living go down.
Taxes are very different when you are retired than when you were working. While working, you get to reduce your income for any contributions you make to qualified retirement accounts. When you are retired, you must pay taxes on all withdrawals from these accounts. Proper tax planning can help you harvest some of your gains while minimizing taxes.
Your risk tolerance should be lower while you are retired. If the stock market experiences a correction, you do not have time to make up loses. Since you probably will be pulling money out of qualified accounts, you may experience sequential risk. This happens in a down market when you must pull money out for living expenses and you cannot recover the losses.
Sometimes, people are tempted to spend too much when they first retire. You may have a bucket list that you have wanted to do. Also, you probably have more time than when you were working. When you first retire, you are probably the healthiest you will ever be. All of these reasons could tempt you to spend more. Make sure that plan is designed to last for your whole retirement.
Last, make sure that you have enough emergency money. Life happens and it often cost unexpected expenses. Major home and auto expenses could be the largest. If your furnace or roof is old, have a plan. Planning is anticipating things that could happen and not being surprised when they do.
Enjoy your retirement, you deserve it.