Most people go their entire career thinking about retirement and just much how they will enjoy life when the time comes. But in order to truly appreciate all your years of hard work, it’s important to make sure you’ve got all your bases covered. There are a few things you need to think about or plan to make sure retirement happens like you want. The earlier you start planning the easier it will be, but it’s never too late to get started!
Related: 5 ways seniors can keep earning money after retirement
Understand Your Income Stream
If you’re one of those employed by a company that offers a pension, you’re in luck. Pensions have really gone by the wayside but they are a huge bonus in retirement because you’ll know just how much you will get every month for the rest of your life. However, if you have a 401(k), there is a formula you should be using to safely plan out how much of your money you should be taking. If you take out 4 percent a year, the theory is that you will leave in enough to make back what you took out through future dividends or stock increases. This should provide you the amount you’ll need for the rest of your life.
Learn the Social Security Game
While social security isn’t really a game, those who know the rules usually end up coming out on top. Social security is a system that works like this: if you delay withdrawing, for each month you delay between the ages of 62 and 70, your benefit will increase. So for someone who has good genetics and a chance of living longer than most, they would make much more money from Social Security if they put off receiving their benefits. However, this is a very personal decision and you need to make the right one for you. The social security administration doesn’t allow you to change your mind once you’ve started taking your benefits, so give it some thought as to what you want to do and what will benefit you the most.
Keep Reading: 10 most affordable places to retire
Consider Health Insurance
If you had an employer that offered a good health care policy, chances are you’ll want to do some research into how to get that same coverage for as little money as possible. Once you leave a company, you may be offered COBRA insurance for a length of time, but COBRA isn’t usually the best choice due to the considerably higher cost. Explore your different insurance options to find one that works best and is the least expensive for you. You can start with the health insurance exchange for your state. If you don’t make enough money, you may qualify for subsidy from the Affordable Care Act (ACA). For some people, a private plan makes the best sense. It all depends on your circumstances.
Look at the Fees
It’s not uncommon for anyone with a 401(k) to want more options than what’s offered through their job. But before rolling over a 401(k) into an IRA account, make sure you know the difference in fees. Penalty free withdrawals from an IRA account are allowed at 59 1/2 years of age, but anyone who retires at 55 or later is able to withdraw four years earlier without having to pay an early withdrawal penalty. In other words, if you want to move your 401(k) into an IRA, it may make sense to hold off for just a few years to a time you won’t be penalized.
Don’t Underestimate the Power of Part Time
Most people don’t have a degree in finance and have found themselves trying to get by on information from family, friends, or their employer when it comes to retirement. The truth is, some people might not have saved enough. The good news is, part time employment can usually supplement retirement savings for those who haven’t saved enough. While this might not be what many people have been dreaming of, the reality is many people get bored once they retire and enjoy working part time. This is the perfect time to make money with the skills or hobbies you have enjoyed throughout your life. If you were a teacher, you could tutor. If you enjoy working with wood, you could make furniture. The choices are literally endless.
Keep Reading: 7 great part-time jobs for retirees
Don’t Forget About Emergency Savings
Emergency savings are always a good idea, even in retirement. Not only can emergencies happen, but dips in the stock market can also mean a loss of retirement income. Although the stock market historically goes up and down, it may be easier to ride out a downturn knowing you’ve got a little extra on the side.
Overall, retirement should be something you enjoy and a stress free time of life. When you consider all your options and everything you need to know about, it’s not too cumbersome of work to get the right answer for you, and the more time you put into thinking about it, the more secure you’ll feel.
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