You’ve worked for it, you’ve earned it, and you’ve decided 2021 is the year. You’re going to retire. Are you sure you’re ready to walk away from the daily grind?
This year has been a doozy in so many ways, and for many who have put in their years in the workforce, 2020 has convinced them that it’s time to step back and spend more time with the activities, causes, and people most important in their lives. But it’s also true that retirement is a big step with lots of moving parts to consider. Fortunately, there are a few things you can do to make sure you’re ready for the transition into retirement.
1. Apply for Social Security four months in advance of your planned retirement date. You can take early retirement when you reach age 62, but you’ll receive reduced benefits for the rest of your life. Normal retirement age, which includes full benefits, is 66 and 2 months if you were born in 1955; normal retirement age rises gradually to 67 for those born in 1960. Some make the decision to work until age 70, when maximum Social Security benefits become available. Whatever you’ve decided, be sure to apply four months ahead of your retirement date to give the Social Security Administration plenty of time to process your request and avoid a hiccup in your benefit payments.
2. Apply for Medicare 3 months prior to turning age 65. The only exception to this rule is if you are still working at 65 and your employer provides medical insurance benefits for you and at least 19 other employees (and your coverage is not retiree coverage or COBRA). You don’t want to miss your Medicare enrollment deadline; doing so could mean you pay a penalty for late enrollment. You will probably not have to pay for Medicare Part A, which covers most hospital and home health care costs. Medicare Part B covers things like doctor visits and some prescription drugs, and the standard monthly premium for 2021 is $148.50 (it could be more, depending on your income).
3. Set up your budget. Add your monthly Social Security benefit to any pension income you’ll be receiving. Next, calculate how much income you will need from your investments, savings, and any retirement plans. This is your monthly income. Now you need to look at all your expenses—housing, transportation, entertainment, food—and don’t forget out-of-pocket medical costs like co-pays and deductibles. It’s vital to know how much of your nest egg you can draw on each month, based on your available resources.
4. Evaluate your investments in light of your risk tolerance. Now that you’re retired, you’ll have less “cushion” to absorb market shocks. On the other hand, your portfolio needs to continue growing at a fast enough rate to make sure you don’t outlive your savings. This is where a professional, certified financial advisor can provide the needed clarity to help you properly match your investments with your ongoing needs as a thriving retiree.
I work closely with thriving retirees to construct sound spending, saving, and investing plans that support secure, dependable retirement lifestyles. If retirement is in your near future and you’d like a professional review of your situation, please contact Empyrion Wealth Management for more information. You can also learn more about year-end tax and planning strategies for 2020 by reading my latest newsletter, “Tax and Estate Planning for 2020”; just click here.
Stay Diversified, Stay YOUR Course!