Rodgers & Associates works to help high-net-worth individuals have a more efficient retirement plan, in ways reflected in these newsletters. If you enjoy what you find, please sign up to receive future issues using the form on the right.
Latest Newsletter: One Year from Retirement? What You Should be Doing to Get Ready
Retirement is now just one year away. Let’s assume you have already addressed the big financial issue—you have enough money to retire. It is time to create a final checklist for the next twelve months. The goal should be to retire only once. No one wants to miscalculate and be forced to return to work for another year or more because they cannot afford to remain retired.
The following are some items to add to your one-year checklist:
Refine your budget.
You should have calculated how much money you plan to spend each year when you retire. Can you really live on that amount? We recommend using the 12 months before retirement as practice. For financial purposes, pretend you are retired and track your spending closely to make sure you can live on what you have budgeted. It’s better to find out now if spending is off than after you’ve left your job.
Understand your medical coverage.
Make sure you know well in advance what costs you will be responsible for and what your company will cover once you retire. What if your spouse is on your medical plan? Will you be able to continue covering them as a retiree? Many employers don’t provide any healthcare benefits for retirees other than COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985). COBRA coverage will last for 18 months following separation of service. You can include spouses and dependents on COBRA. Seniors become eligible for Medicare at age 65. Retiring at 65 would solve the problem or retiring at age 63½ with COBRA. Younger retirees will need another plan.
Look at all your employer-provided benefits.
Dental, vision, life insurance, and disability are a few common employer-provided benefits. You may not need life insurance if you’ve grown your assets sufficiently and your house is paid off. However, dental and vision expenses will continue. This would be the year to take care of any dental or vision related issues while you still have coverage.
If you have a pension, make a payout choice.
Your options will include whether you want to include a benefit for your spouse—joint life expectancy for all or some portion of the benefit. You may want to consult a financial planner to help you evaluate this option. Once you make your pension election, the decision is often irrevocable. Generally, the option based on a single life expectancy will offer a higher monthly benefit, and the option based on joint life expectancy will provide lifetime income and more security for you and your spouse.
Decide on other distributions.
Many of today’s more popular defined contribution plans, such as 401(k) and 403(b) plans, offer a choice of lifetime income or a lump sum distribution. You should carefully consider all the options available to you. Some of the options could have serious tax consequences if the wrong choice is made. Gather information about your retirement plans, so you know the rules and deadlines for making your elections before you cash your last paycheck.
Review your most recent Social Security estimate of benefits.
One of the most important decisions you need to make is when to take Social Security benefits. Eligible workers can begin drawing benefits at age 62 but benefits increase each month you wait to draw until age 70. Smart use of your other retirement accounts and personal savings may be able to provide the income you need so you can delay starting benefits.
Consider how you’ll spend your time.
Some of the most important issues you need to face in retirement will involve lifestyle decisions. How will you spend your time when you’re not working anymore? Will you work as a volunteer or start a new vocation? How frequently will you travel, if at all? Will you spend winters in a warmer climate? Make sure you always have something scheduled that you can look forward to doing.
Retirement planning is an ongoing process. Picking up your gold watch does not mean you can rest easy. Each year, you will want to check in with your financial adviser to make sure your financial strategy is performing as expected and make any adjustments that may be needed to help you stay on track.
Ease into your new retirement lifestyle. Don’t make dramatic changes, such as selling your house and buying a new one in another part of the country. You should consider renting first to make sure this is really where you want to live. Don’t pull a big chunk of money out of a retirement account to pay off a mortgage or other debt. Doing so could reduce your monthly bills, but at what cost? Paying an additional 20% or more in taxes to pay off a 5% mortgage may not be a wise financial decision. Consult with a knowledgeable financial adviser for guidance on making these decisions.
Choosing health insurance through COBRA continues your employee coverage for 18 months after you separate from service.
Before you retire, make sure you know the rules and deadlines for making benefit elections on health insurance and retirement programs through your employer.
Retirement planning continues even after retirement. Annual reviews and updates can keep you on track for a comfortable retirement.
You’ve worked hard to save for retirement. How can you turn your wealth into an income that’s designed to last your lifetime?
Now that retirement is a reality, or will be soon, you probably have questions. Here on our website, you can find generalized advice, but don’t you deserve advice tailored just to you?
Clint Krushinsky is here to help you get answers. Simply call him at 717-560-3800 or 1-888-876-3437. He’ll answer your questions and help you get to know us. If we are a potential fit for each other, Clint can arrange for up to two hours of initial consultation with no cost or obligation and no sales pitch.
Search for valuable insights from the Rodgers & Associates team of advisers: