Looking forward to not having to go to work anymore? Planning trips to far-away places or considering lifelong learning options? Maybe you’re even thinking about those long-ago ambitions and wondering if you can turn them into reality?
Retirement can be a wonderful opportunity to make the most of your next stage of life, but it requires advance planning so you have the financial resources to accomplish your goals and pursue your dreams. Even if retirement is more than just a few years away, you still need to start the process now, to make sure everything is in place.
Next week is National Retirement Planning Week 2013 (April 8 to 12), the perfect time to do some serious pre-retirement planning to evaluate if you will be ready when the time comes. (Already retired? It’s not too late to evaluate your situation and make changes!) Here are some areas to assess:
Your Finances: Do you know how much money you’ll have available and how much you’ll need to live on? While you can take Social Security at age 62, waiting until you are 70 might make more financial sense. You’ll receive the same amount in lifetime benefits in either case, but the monthly benefit amounts can differ substantially based on your retirement age, according to the Social Security Administration. Working just a few years longer can translate into a stronger financial position.
As for calculating your post-retirement expenses, the National Retirement Planning Coalition cites rising inflation, increased taxes and market uncertainties as just three of the factors that can have a negative impact on your budget. And, if you retire with significant amounts of debt, you could find yourself having to return to the workforce just to make ends meet. Improving your financial state now while you still have an income can make your retirement years easier on your wallet. (More tips are available at SmartMoney’s “How to Set a Retirement Budget.”)
Your Insurance Coverage: Is your life insurance benefit amount enough to provide for your spouse or partner should you die unexpectedly? What about long-term care—do you have sufficient assets for both of you to cover the costs? And do you understand what Medicare covers—and what it doesn’t
- Life insurance: If you have a mortgage, other financial obligations or a family member dependent on you for support, life insurance can fill the financial gap when you die. Depending on the plan, you may also be able to tap into it in case of a terminal illness diagnosis. (Not sure how much you need? Use LIFE’s Life Insurance Needs Calculator and compare results with your current policy amount.)
- Long-term care insurance: While you’d like to remain independent as long as possible, odds are that, at some point, you will need some measure of assistance that could result in hiring a home health care aid or moving to an assisted living facility or nursing home. However, health insurance only covers doctor and hospital bills. Medicare just covers short-term skilled nursing home care and Medicaid only comes into play if your assets are very limited. A long-term care policy can ensure that you receive the level and type of care you need. (For more information, visit LIFE’s long-term care insurance page.)
- Health insurance: While it’s true that you can sign up for Medicare coverage at 65 even if you aren’t ready to retire, (which could keep you from being charged higher premiums), you will most likely want to buy a Medicare Supplemental or Medigap policy to supplement your coverage and pay for expenses Medicare doesn’t cover. (Visit Medicare.gov for more details.)
With retirement potentially lasting 30 years or longer, you want to make sure you don’t outlive your money. Consult with your financial planner and insurance professional for advice on strengthening your pre-retirement position so you’ll be able to enjoy your post-employment years.