If you are approaching retirement age, you may be eagerly anticipating the day when you no longer have to report to a regular job. On the other hand, you might be feeling anxious about your future finances or how you will spend your time. Following the five tips described below will help ease any anxiety you may have — and ensure that your retirement years are wonderful.
1. Develop an Overall Financial Plan
One of the most anxiety-producing circumstances is realizing that your post retirement income doesn’t cover basic expenses, much less allow for leisure activities. The time to develop an overall financial plan is before you retire. Assess your savings and draw up a tentative retirement budget. Aspects to consider include Medicare and other health care costs. You should also consider how and when to begin withdrawing funds from an IRA or other retirement savings, and consider the tax implications. Consulting with an accountant or financial planner is a smart strategy at this stage, even if you are used to handling your own finances.
2. Determine when to Begin Drawing Social Security
Eligible individuals may apply for Social Security benefits as early as age 61 and 8 months, and begin receiving funds at age 62. The Social Security Administration website contains comprehensive information on receiving benefits, as well as a portal to submit an application.
Monthly benefits are reduced for anyone who begins receiving Social Security benefits before reaching full retirement age, which can range from age 66 to age 67 depending on the year of birth. On the other hand, many people choose to delay receiving Social Security beyond their full retirement age because they are still working, or because they have sufficient income from other sources to cover their expenses. Delaying the start date for drawing Social Security translates into larger monthly payments. However, it is mandatory to begin drawing Social Security upon reaching age 70.
It is possible under certain circumstances to continue working while receiving Social Security benefits. However, there are income limitations for individuals who have not obtained their full retirement age. Exceeding these limits can reduce monthly Social Security payments.
3. Sign Up for Medicare
Whether or not you opt for beginning Social Security benefits, you should sign up for Medicare benefits at age 65. If you are already receiving Social Security benefits, you will automatically be enrolled in Part A (hospital insurance) and Part B (medical insurance). Parts A and B are also known as Original Medicare. If you have not signed up for Social Security, you should sign up for Part A within the seven month Initial Enrollment Period — this includes the three months before and after your 65th birthday, as well as your birthday month. Some people who have medical insurance coverage through a job, spouse or other source may opt not to sign up for Part B, which requires a separate premium.
Regular Medicare does not cover the cost of prescription medications. A Medicare Advantage plan, otherwise known as Medicare Part C, replaces Original Medicare and also includes prescription drug coverage. Many Part C plans also cover vision and dental screening. Medicare Part D only covers prescription drug costs, and may be combined with regular Medicare.
Choosing the right Medicare coverage requires diligence and careful consideration. The Medicare.gov site includes a wealth of useful information, along with a portal for beginning the process of applying for Medicare coverage.
4. Purchase or Change Life Insurance Coverage
Life insurance provides a number of benefits, including providing financial resources to cover the policyholder’s final expenses. Depending on the policy provisions, coverage can provide replacement income, pay off debts or cover the expenses of a funeral. For those who qualify for life insurance through USAA, life insurance policies also provide military-related benefits for active duty personnel, veterans and their family members.
5. Find Ways to Spend Your Time
The cliché of retired people spending hours in their rocking chairs has long since passed. Many retirees work — either because they choose to or to supplement their incomes. For many retirees who are not working in paid jobs, volunteer work provides fulfillment and a means of making connections with others. Taking up a hobby, pursuing a sport or traveling are also enjoyable ways for retirees to spend their golden years.
Enjoy Your Golden Years
One of the most important aspects of ensuring a wonderful retirement is developing a financial plan, including determining when to begin drawing Social Security, funds from an IRA and other retirement benefits. Settling on a Medicare plan is also important. Updating or obtaining life insurance coverage ensures that your loved ones will not be left with the responsibility of covering your final expenses.
Whether or not you continue working, you should make plans to occupy your time. Volunteering, pursuing a hobby or sport or traveling are all enjoyable and rewarding ways to spend your golden years. Go ahead — you deserve it!