During these difficult economic times, a lot of people were forced to think twice about their retirement. Many had planned to retire on or before a certain date, but due to the change in the economic circumstances, employees were forced to postpone their retirement date. Majority of workers who plan retirement hardly make a long-term plan for their retirement, and as we ‘all’ know, retirement planning is more than just saving enough cash to sustain your standard of living, although this is important. Remember that when you retire, you are about to embark on a totally different lifestyle, and it’s not about waking up one day and deciding to call it quits. As Anne Tergesen explains in the following article, there is a lot of planning and important things to consider before you finally call it a day.
Retirement planning, at its best, is about much more than the size of your nest egg. With that in mind, one of the smartest ways to prepare is to map out a to-do list, one that counts down to “R” day.
Most workers prepare for later life by focusing on a single, key question: Have I saved enough? Yes, a healthy nest egg is important. But it’s just as important to develop a vision for how you want to spend your time in later life. After all, the more specific your plans, the easier it will be to gauge just how much money you’ll need and how fulfilling your retirement years will be.
We have compiled a checklist, in consultation with Deena Katz, an associate professor of personal financial planning at Texas Tech University in Lubbock, of things to do and consider over a five-year timeline before this crucial date.
Lifestyle: Start thinking about how you and your spouse wish to spend time in retirement. Take an inventory of your past and current interests, hobbies and activities.
If you need help, hire a personal or life coach (check the International Coach Federation’s “coach referral service” at coachfederation.org) or enroll in an online workshop or course at a college or community organization.
Some examples: the programs available through My Next Phase (MyNextPhase.com); the University of North Carolina at Asheville’s Center for Creative Retirement; and Civic Ventures’ Next Chapter project, which offers “life planning” and other programs in communities across the country.
Finances: Take a stab at answering The Big Question: Will I have saved enough to retire in five years?
Start by estimating your retirement spending needs, including taxes and premiums for Medicare supplementary coverage. Consider long-term-care insurance, since the sooner you purchase coverage, the lower the premiums will be.
If you don’t have a financial adviser, consider hiring one or using one of a growing number of free or low-cost services sponsored by financial-services companies that estimate how much you can afford to spend in retirement and recommend ways to save and invest. Examples include Fidelity Investments’ Retirement Income Planner and Charles Schwab‘s Real Life Retirement Services.
Take advantage of provisions that allow those 50 and older to contribute an additional $1,000 annually to individual retirement accounts and $5,500 annually to 401(k) accounts.
Think about whether you will need life insurance.
Estate Planning: Make sure you have a will, an appointed power-of-attorney, health-care directives and an estate plan.
Lifestyle: Start exploring your ideas. If you’re considering relocating, research the communities you’re interested in. Helpful resources include Relocationessentials.com, NeighborhoodScout.com and RetirementLiving.com.
If you plan to volunteer, organizations including HandsOn Network, VolunteerMatch and Civic Ventures’ Next Chapter project can help you get started. To ascertain whether an organization is a good fit, start volunteering now.
Finances: Start thinking about Social Security. You can claim benefits any time between ages 62 and 70. But the longer you wait, the larger your monthly payout will be. Factors to consider include your life expectancy and that of your spouse, who can receive up to half of your benefits. It’s also important to consider whether you will owe income tax on any of your Social Security income.
To figure out the optimal time to claim your benefits, use the calculators at SocialSecurity.gov and read “When to Start Receiving Retirement Benefits,” a publication available on the site. Also, search online for “Innovative Strategies to Help Maximize Social Security Benefits,” a publication by James Mahaney and Peter Carlson.
Lifestyle: If you plan to relocate, start visiting communities on your short list. If you want to start a business, enroll in a course or workshop at a local college or through SCORE, a nonprofit that pairs experts with new entrepreneurs (Score.org; 800-634-0245).
Finances: Request an estimate of any pension or retiree medical benefits you are eligible to receive from your employer. Also, revisit the retirement spending and income plans you made two years ago. Spend the year living on the budget you have prepared.
Health Care: Get educated about Medicare, which covers a portion of medical expenses for those ages 65 and older, and supplemental policies, including any retiree coverage your employer might provide. Start with “Medicare & You,” among other publications at Medicare.gov. For more information, check the website of the nonprofit Medicare Rights Center (MedicareRights.org).
Lifestyle: If you want or need to work for pay in retirement, consider whether to do so part time or full time. Do the opportunities you want to pursue require additional training? Start networking. Devote more time to hobbies to ascertain how fulfilling they might be as primary activities.
Finances: If you’re interested in pursuing a so-called phased-retirement arrangement — which would allow you to reduce your hours gradually, often over a set period of time — approach your employer about entering or starting such a program. The key: Persuade your boss that you’re indispensable, while looking for ways to make an impact on a reduced schedule.
Health Care: If you plan to retire before becoming eligible for Medicare at age 65 and your employer doesn’t offer retiree coverage, arrange for interim health insurance. Ask your employer about Cobra, the federal law that allows many to continue group health insurance for a limited period after leaving a job. You also can research individual policies available from private insurers. (Warning: Insurers turn down about 30% of applicants ages 60 to 64.)
Lifestyle: If you plan to start a business, draw up a detailed business plan. (See “Essential Elements of a Good Business Plan” at the Small Business Administration’s website, sba.gov.) If you want to work, check the listings at websites including RetiredBrains.com, RetirementJobs.com and SeniorJobBank.org.
Finances: Figure out how to convert your savings into a reliable stream of lifelong income. Some new advisory services, including Fidelity’s Income Strategy Evaluator and Charles Schwab’s Retirement Planning Consultation, can help retirees devise a plan to tap their accounts, while minimizing tax bills and the risk of going broke.
Get a final estimate of benefits from your employer.
Consider whether to roll — or transfer — your 401(k) money into an IRA upon retiring. Leaving your money in your employer’s 401(k) plan may be advisable if the fees are low. Depending on the state in which you live, a 401(k) plan also may offer greater protection from creditors.
Health care: Address any hearing, vision or dental needs you have now, since these aren’t covered under original Medicare.
Three months before your 65th birthday, contact Social Security to sign up for Medicare. (If you claim Social Security benefits before age 65, you will generally be automatically enrolled at age 65, unless you decline coverage.)
Free counseling is available through the nonprofit State Health Insurance Assistance Program, or SHIP (SHIPtalk.org). Medicare.gov features calculators that allow you to search for and compare coverage options.