If you’re thinking about retiring, you may be facing fears of being able to survive on a limited, fixed income, in a world where everything is gradually becoming more expensive. According to top financial planners, the biggest pre-retirement concern is whether or not their retirement fund will last. Recognizing that setting aside hard earned money during your working years may be difficult, and setting aside large amounts is more difficult still, advisors will tell you, they never hear complaints from retired clients that they’ve put too much money away.
Having enough savings to retire on is only the first in line of many pre-retirement financial concerns. Rising healthcare costs, Social Security, unforeseen expenses and debt, are some of the others things pre-retirees consider before deciding on the right time to retire.
Rising health insurance costs is the second most common concern. If you have post-retiree health insurance coverage provided by your employer, consider yourself lucky. These benefits are rare and not available or affordable for most employers. The majority of retirees must rely on Medicare. Educating yourself on Medicare Parts A, B, C & D, both the costs and benefits is highly advisable. The official U. S. government site for Medicare is www.mymedicare.gov. There you will find the information you need before enrolling.
There are also Medigap and Medicare Supplement policies you may find beneficial to your situation. Find a financial planner in your area to assist you with information on these coverages.
Social Security Retirement Benefits is what most of the population depends on after their working years have ceased. Most people believe that Social Security benefits cannot be claimed until their government established “normal social security age” (which varies based on when you were born). However, depending on your individual situation, you can claim benefits prior to this age, or you can defer payments to an older age. The longer you defer receiving payments, the higher the payments will be for you.
So how do you know if you qualify for Social Security retirement benefits? You qualify for Social Security benefits by earning Social Security credits when you work in a job and pay Social Security taxes. Your earnings and work history determine your eligibility for retirement or disability benefits or your family’s eligibility for survivors benefits when you die. In 2017, one credit is received for each $1,300 of earnings, up to the maximum of four credits per year. Each year the amount of earnings needed for credits goes up slightly. The credits you earn remain on your Social Security record even if you change jobs or have no earnings for a while. The number of credits you need to be eligible for benefits depends on your age and the type of benefit. Anyone born in 1929 or later needs 10 years of work (40 credits) to be eligible for retirement benefits. People born before 1929 need fewer years of work. Also, if you are not entitled to retirement benefits on your own, you may still be entitled to benefits on the record of a current or divorced spouse. For more information visit www.ssa.gov.
Unforeseen expenses, mortgages and debt are other concerns when on a limited budget. From unexpected illness, to major home or automotive repairs, unforeseen costs can negatively impact your retirement fund. A knowledgeable financial advisor can strategize with you to help you prepare for these types of occurrences.
Ongoing debt such as mortgages, credit cards, medical expenses or financially assisting adult children can add to a pre and post retirees financial stress. Many times retirees on a fixed budget may qualify for reduced monthly payments on their mortgage, or a reverse mortgage may be of interest. Consolidation loans or consulting with a financial advisor may help with debt. And while lending money to family or friends may be a generous thing to do, many times these types of “loans” transform into losses to the lender.
End-of-life planning is something many of us don’t like to think about. Even though we’ve planned to financially take care of our loved ones when we’re gone, through life insurance, our retirement plan, perhaps you’ve completed a Will or created a Trust, we still do not like talking about the subject.
If you’ve created any of these financial vehicles for your loved ones or to cover final expenses, first and foremost, make sure someone knows they exist. A recent survey shows that 59% of families encounter funeral expenses after a loved one passed. Today, over a billion dollars of life insurance has gone unclaimed because beneficiaries didn’t know it existed.
Make sure to have Advance Directives, Power of Attorney or Payable Upon Death paperwork completed. Assign a successor or executor to handle your estate. And communicate your final wishes to your loved ones to spare them from having to make difficult decisions without knowing your wishes.
The thought of retirement forces us to consider all these realities. But with some planning on your part, you can continue to live the lifestyle you enjoy now. Whether you continue to work part time through your retirement, donate your time and service to others, or simply relax and enjoy the good life, with a little planning you can enjoy the retirement you’ve always dreamed of.