If you’re nearing retirement, you may find yourself daydreaming about enjoying the fruits of your labor. While it’s important to plan for retirement at any stage of life, if you’re getting close it’s crucial to be realistic about how prepared you really are. One way to take inventory of what you have and haven’t accomplished is to ask yourself a few questions.
1. How much money do I have saved and is it enough?
Without knowing how much money you have saved and determining if it’s enough for your plans in retirement, you can’t be sure that you’re ready.
With any retirement plan, different people will have different sources of income. Some have multiple 401(k)s, some have a variety of IRAs and/or investments and some people may have a pension plan. Whatever the case is, you’ll want to check on these accounts to get an idea of what you’re working with. You may be pleasantly surprised, or you may be concerned. Either way, it sets up a realistic expectation of what you’ll need to do while moving forward.
It’s also important to think about what your income source(s) will be during your retirement. You may be banking on a pension, tax-advantaged retirement accounts or expecting help from Social Security. Some retirees also choose to stay busy and start a business, buy real-estate or generate income through other ventures. Making the right decisions now and diversifying your income sources can help contribute to a stress-free retirement.
2. Have I made an estate plan?
Ensuring there’s a plan in place for easy management of your assets after death or incapacitation should be included in your retirement planning. Without an estate plan, your financial affairs could be left in shambles and headed to probate court—a headache for your heirs.
Check out these five estate planning documents you may want to have in place before you retire.
3. What is my plan for healthcare?
Let’s face it—as you get older you’re most likely going to need healthcare. While you’re planning for your retirement, you should be planning for your medical needs and how you’re going to fund them. Healthcare isn’t cheap, and it may even become more expensive. However, healthcare costs don’t have to wipe out your retirement savings if planned for properly.
Many use a Health Savings Account (HSA) to secure funds for healthcare in retirement. Any money you contribute to this account is tax-deductible—and if used for healthcare costs your funds will grow tax-free. Another option is Medicare. Once you turn 65, you’ll want to carefully review and consider all your options.
At the end of the day, the most important thing to do is to not underestimate these costs.
4. What will my Social Security benefits look like?
Social Security is another source of income for retirees. However not everyone’s benefits will look the same. There are many stipulations that affect how much you’ll receive. These include:
- What age you claim your benefits at.
- The amount of time you worked and contributed to Social Security.
- How much money you made during those years.
- Your marital status.
Unfortunately, this program is somewhat confusing and not well-understood by the public. By doing a bit of research and/or getting professional help, you can maximize your Social Security benefits. Getting the most out of Social Security means having an additional monthly income stream to fund your retirement.
While there are many things to consider before taking the leap into retirement, honestly answering these questions can help you create a long-lasting and enjoyable retirement. Knowing where you stand, where you want to be and figuring out how you will get there can be complicated. SimplyAdvised can match you with a vetted and knowledgeable professional to analyze your situation and put you in the best position possible.