When it comes to retirement planning there is much to consider and no two scenarios are the same. That is why getting the right retirement advice is so important. Education is the first place you need to start when tackling these important issues. Where do you go to secure information on topics such as; Will i have enough income to last a lifetime? How about Social Security, Medicare, Medicaid Spend Down, Insurances, Power of Attorney, Wills, and much much more? The York Financial Wellness Group believes as you prepare for retirement, there are issues you should consider to help make your transition into retirement a successful one. We believe history has shown that these activities are best conducted with the participation of a spouse along with the support of a companies HR department, as retirement is often a significant point of change in an employee's life.
The checklist below can help you organize activities and better prepare for the big day.
- Prepare your retirement expenses
- Review your insurance coverage
- Note Medicare milestones on your calander
- Know when to apply for your Social Security benefits
- Develop a retirement income plan
- Select retirement rollover options
- Review Will, Trusts, Powers of Attorney and Beneficiaries
- Set aside emergency funds
Determine Your Retirement Expenses
As you work through your retirement budget, be sure to consider how your lifestyle might change over the next 25-30 years. You may find you actually spend more during retirement, especially on things like travel, hobbies and entertainment. Health care costs may significantly increase during mid and late retirement, and financial responsibility for an elderly parent could be an additional consideration. Note that if you plan to move, a change in cost of living will also affect your retirement expenses.
Because needs vary from person to person, it's a good idea to review every expense, from charitable contributions and gifts to basic necessities, to get a clear understanding of what your retirement will actually cost.
Review Your Insurance Coverage
Your insurance needs may change in retirement just as your financial priorities and responsibilities change. Make sure to review your life, health, homeowners, and auto insurance policies so that your coverage is appropriate for your new lifestyle. You may find that life insurance isn't as much of a consideration as it once was, or you may decide that it could help meet your estate planning goals. Prescription medications or other medical expenses may no longer be covered by your employer or insurance, so investigate how your health coverage and needs may be impacted after you retire.
You should also consider the importance of homeowners insurance. Your home is usually your single biggest investment, and its loss could mean that you also lose the secure retirement you've worked so hard for.
Note Medicare Milestones on Your Calendar
Medicare has two parts. Part A is hospital insurance and helps pay for hospital, hospice and home health care (in general, most people do not pay for this). Part B is medical insurance and helps pay for doctors, outpatient care, and other medical services (in general, most people do pay for this). Depending on your age and whether or not you're receiving or plan to receive Social Security, the Medicare application process, timelines and premiums may vary. Note that applying late may result in delayed benefits and higher premiums. The resources listed can help you determine how and when you should apply for Medicare. You should also seriously consider long-term care or other additional insurances to supplement baseline Medicare coverage.
Common Pitfall: Assuming that most health care costs will be covered by the government.
If you underestimate the significant health care costs you could be responsible for, you may discover that: (1) you wont be able to afford the quality of care you deserve, or (2) you'll need to into savings slated for other expenses.
Know When to Apply for Your Social Security Benefits
You'll need to apply for Social Security three months prior to the month of your 65th birthday or three months before you wish to start collecting benefits. At the earliest, you may apply at 61 years and 9 months of age, although benefit reductions apply depending on your full retirement age (determined by year of birth) and personal situation. Because the rules and options can be rather complex, you may wish to speak with a Social Security representative in the year before you plan to retire.
If your spouse is deceased, you can begin collecting his/her retirement benefits at age 60, at age 50 if you are disabled. Note: you will not get the entire benefit your spouse was entitled to.
Develop a Retirement Income Plan
Understand that a number of factors may impact your plan: lifespan, distribution rate (how much you withdraw each year), inflation. taxes, market volatility, rate of return, health care costs, and your estate goals. It's also important to understand where your income is coming from and whether your sources are exhaustible or lifelong.
Make sure your lifetime income is greater that or equal to your essential retirement expenses as you work to build your Plan. Finally, remember to reevaluate your portfolio when market conditions change, when your needs change, and if time and asset withdrawals change the balance of your portfolios.
Select Pension Benefits and Retirement Distribution Options
The decision about what to do with your retirement plan assets when you retire can have a significant and long lasting financial implications. Know what the best options are for your situation and understand that some of these decisions may be final. It is often useful to think about consolidating assets as you near retirement. Leaving funds in a number of places or institutions makes it more difficult to manage your income and your investments because you're juggling statements and putting more time and effort into keeping track of things. You may even qualify for lower account maintenance fees or other price breaks if you consolidate with Fidelity. Keep in mind that fees may apply when closing and consolidating accounts.
Be aware of what the process, timelines, and options are for your retirement plan assets and get appropriate documentation from your employer(s). If you saved money in a 403(b) plan before 1986, you may be able to postpone withdrawals on some portion of your money until you are 75.
Review Wills, Trusts, Powers of Attorney, and Beneficiaries
Everyone should have a will, but a will by itself may not be enough to protect your assets and help reduce estate taxes and other costs, so you may want to look into setting up a trust. Also, be aware that a "Power of Attorney" and a "Durable Power of Attorney for Health Care" are not the same; the former deals solely with control of assets while the latter only provides for health care decisions. Have your lawyer and/or financial planner review your Will, Powers of Attorney, Beneficiaries are appropriately protected.
Oftentimes, legal provisions you've made at other life stages may need to be adjusted to be more appropriate for your current situation. Perhaps your marital status has changed or your estate size and complexity is now different than when you originally drew up your estate documents - take time to reconsider the relevance and effectiveness of your documents as you near retirement. Make sure that in the event you or a spouse should become incapacitated your affairs will be handled in the manner you desire.
Important Estate Planning Information
Information provided is general and educational in nature. It is not intended to be, and should not be considered as, legal or tax advice. Fidelity does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Fidelity makes no warranties with regard to the information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.
Set aside emergency funds
You'll want to make sure you've set aside sufficient funds for unexpected costs. This buffer will ensure that you avoid using assets earmarked for income or growth purposes. As a general rule of thumb, we suggest saving about three to six months worth of expenses for your emergency fund. When you develop your annual budget, it will help you determine what that amount is for you. Whether it's car repairs, dental work, or travel expenses for a family members illness or death - not having to worry about how you're going to pay for unanticipated events will make them less stressful to deal with.
Make sure your emergency fund is in a liquid, interest-bearing account; you want to be able to access it without penalties at a moments notice, but you also want it to be making some return while it sits there aiding your peace of mind. Lastly, remember to something unexpected pops up.
***Annual Account Review
An ongoing annual account review is necessary and extremely important to make sure your retirement plan stays on course and keeps up woith any new changes to any aspects of your personalized retirement plan. The York Financial Wellness Group continues to help and advise your retirees long after they have left the company. This is our ongoing promise to you.