How To Know If Youre Ready To Retire – Forbes

Posted: August 23, 2020 at 10:58 pm


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Retiring is a huge life event, and it isnt one that comes with many do-overs. You have to get it ... [+] right the first time.

Retiring is a huge life event, and it isnt one that comes with many do-overs. You have to get it right the first time.

Luckily, there are ways to prepare for retirementand even practice itto help ensure youre ready when the day comes.

What to do first

A few years before you plan to retire, have a practice run. If you have a retirement plan that gives you a clear picture of how much money youll have to live on annually, spend a full year to two years living only on that amount. If you dont, your first step is to meet with a financial advisor to get sense of your retirement income estimate.

If you can live comfortably on the decided amount, thats great. If not, its better to know that now rather than later, and its time to devise a plan to increase your future income.

Have a timeline for your decisions

Do you know when you must make certain retirement-related decisions? Do you even know what decisions youll need to make? Having a clear idea of these decisions and a timeline to make them will reduce your stress and make retirement a smoother event.

Pre-retirement decisions

Before you retire, youll need to determine if you have any debts that need to be refinanced. Its hard to refinance mortgages or other loans when you dont have demonstrable income, so do this long before you give notice at work.

Youll also need to decide how youll handle long-term care expenses and if you want to use long term care insurance for some of those potential costs. Applying for this insurance should ideally be done ten years prior to retiring, and three to five years before is basically the last chance for it to be affordable.

Retirement day decisions

Retiring likely means losing your employer-sponsored benefits, so youll need to make decisions about health insurance. If youre retiring at or after age 65, then you can seamlessly transition into Medicare. Make sure you remember to enroll in Medicare Part A 60 to 90 days before your 65th birthday whether youre planning to retire or not. For Part B, you can wait to enroll until after your retirement as long as youre at least 65 years old. You can learn more about Medicare in this episode of my podcast.

If youre retiring after age 63 , you can use COBRA provisions to continue your employer health plan for up to 18 months until youre eligible for Medicare. However, if youre retiring earlier than that, youll either need to join your spouses health plan or to use the health insurance exchange in your home state.

If youre one of the fortunate few people who will still be receiving a pension, youll need to decide how youd like to receive your benefit. You will likely be given the option to maximize your benefit as a single personmeaning it expires after your deathor a few options on how youd like a spouse to receive income from your pension should he or she outlive you.

Post-retirement decisions

Social Security is a very complex benefit, and timing your benefit claim is an important decision youll need to make. You and your spouse must determine whether to claim immediately at age 62 or to wait until full retirement age or even age 70 to begin receiving benefits. The decisions you and your spouse make can greatly impact how much money youre eligible to receive during your lifetimes and during a period of widowhood for either of you. While I could go on and on about this, Ill let those interested read more in this article I published on the topic.

Youll also want to review your current insurance coverages to see where you can save money. Since youre no longer commuting to work, you may be able to lower your car insurance premium. If youre paying for disability insurance, youll no longer need it and can let it expire. Lastly, if you have term life insurance, you may no longer need the extra death benefits and can consider discontinuing the coverage after claiming your Social Security and pension income.

The most important step

The most important thing to do before you retire is make sure you have a substantial nest egg youve built up over the years.

You dont know what the future will hold, and having access to capitalespecially funds not subject to market volatilityis vital to a successful retirement.

The lesson

Theres a lot to consider when youre thinking about retiring. Starting to make decisions and prepare for the life change early will help you be successful in your retirement.

Retirement is the one thing you cannot borrow money to accomplish, so make sure youre able to live off the income youll have. Returning to work out of necessity after youve started your retirement is not only the opposite of what youll want to do, but it can also be incredibly difficult to do so.

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How To Know If Youre Ready To Retire - Forbes

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August 23rd, 2020 at 10:58 pm

Posted in Retirement