The usual retirement age was 65, but times have changed. Even the Social Security Administration (SSA) has raised the age at which full pensions are available. With the shift from defined benefit plans to defined contribution plans-and many savings programs that do not generate projected returns-individuals may need to delay the date they begin receiving Social Security and other retirement benefits. They also have to live a retirement that is quite different from the one they envisioned.
Even for those who are financially secure, reaching age 65 means being. The time to retire is not always right when you reach the age of 65. Many 65-year-olds love their jobs and want to keep working. How to decide when the time is right? (For more information, see
Determine your readiness
If your employer's policy is to offer retirement pensions at age 65, consider whether you are truly ready to retire from a psychological crisis. and financial perspective. If not, consider asking your employer to allow you to work a few more years or if you would prefer to be hired as a consultant. Want to do so at least one year before reaching age 65. Do so before the age of 65, as some employers begin the retirement process early. Many employers are now focusing on hiring and retaining employees who are experienced and know the business to strengthen their intellectual banks.
If you remain as an employee, this means not only that you will continue to receive a regular income, but also that if your employer has a health plan, you will continue to receive health insurance and other benefits. On the other hand, going the advisor route gives you more flexibility and allows you to retire more and use both options at the same time.
Create a budget
Retirees who have saved for many years may feel that reaching retirement age means it's time to enjoy the fruits of their labor. Fair enough, but the risk is that people may go overboard in a few years and spend it all down. To avoid falling into this trap, plan your spending. Don't forget to include non-traditional expenses you plan to incur, such as z. B. additional trips. This will help you make a realistic decision about how easily you can afford some of these future plans. If you are no longer working, a budget is even more important, since your income will likely come from your savings, Social Security, and any pension holdings you may have.
"One easy way to create a budget is to take out your most recent payment stubs. Consider the net pay amount – after all deductions have been made. Convert that to a monthly number. Add or subtract amounts that will be different in retirement; Usually this number does not change much. If anything, it will account for more travel, "says William DeShurko, chief investment officer of Fund Trader Pro in Centreville, Ohio."If you need to budget for every expense, don't retire. You can't "cut it off" with a 30- or 40-year lead time. "
Determine the best time to claim Social Security
Social Security is usually included in financial projections for retirement. An important decision when including Social Security in your equation is to determine whether you will receive full or reduced benefits. If you were born before 1938, you are eligible for full retirement benefits from the SSA at age 65. If you were born in 1938 or later, your age depends on how long after 1937 you were born. See the table below for details.
|Age to receive full Social Security benefits|
|Year of birth||Full retirement age|
|1937 or earlier||65|
|1938||65 and 2 months|
|1939||65 and 4 months|
|1940||65 and 6 months|
|1941||65 and 8 months|
|1942||65 and 10 months|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
|1960 and later||67|
|NOTE: Individuals who have participated in the 1. January of a year were born, should refer to the past year.|
If you collect Social Security benefits before you reach your full retirement age, your annual benefits will be lower than if you waited until you reached full retirement age. If you don't need the payments when you reach full retirement age, wait until 70 for maximum benefit. Don't wait any longer to see what you will receive.
"Factors that drive Social Security taxation include the historical income of you and your spouse, your age, and your life expectancy. Most adults who are healthy would benefit from suspending their Social Security until age 70, " says Mark Hebner, founder and president of Index Fund Advisors, Inc. in Irvine, California, and author of" Index Funds: The 12- Step Recovery Program for Active Investors. "There are online resources for investors to help them maximize their potential Social Security payout. "
To get a comprehensive understanding of your Social Security benefits, including how to determine how much you are likely to receive, visit the SSA website.
Signing up for Medicare
Medicare can be used to cover certain medical expenses instead of using your savings to cover these amounts. Medicare offers hospital insurance – for inpatient care and certain post-acute care – and health insurance for medical services not covered by hospital insurance.
Medicare is available to individuals age 65 and older. (The age may be younger for people who are disabled or have permanent kidney failure.) The medical portion of your coverage is fee-for-service and optional. So if you are covered by a health plan at work, you may not need the medical portion. or you can compare the costs and features of both and choose the one that works best for you.Hospital insurance is available to you at no additional cost because you already paid it as part of your Social Security taxes while you were working.
Even if you won't retire at age 65, you should still sign up for Medicare because it will cost you more if you sign up later. See Medicare 101: Do you need all 4 parts?
Use your home for income
If you own a large home, it may be time to consider moving to a smaller home that is less expensive and/or in an area where the cost of living is. lower. If you sell your home, you can set aside extra funds for your retirement egg.
If you're not ready to sell or flip your home but need additional income, consider whether a reverse mortgage is a suitable option for you. Under a reverse mortgage program, the lender will use the equity in your home to provide you with tax-free income. Before you apply for a reverse mortgage, make sure you ask as many questions as possible, including the amount of fees involved, the terms of the mortgage and your payment receipt options. For more information, see The Reverse Mortgage: a retirement tool.
Manage your income
If you need income from your savings to fund your retirement, take steps to ensure you minimize taxes and maximize what you can keep. Your unique financial profile will determine the most opportune time to take certain types of income, but from a general perspective, withdrawals from tax-deferred accounts such as traditional IRAs and employer-sponsored (tax-deferred) plans should be made in years when your the income tax rate is lower. This will help minimize the amount of income tax you owe on these amounts. Of course, if you are of the minimum required retirement (RMD) age, you will need to meet your RMD amounts from these accounts regardless of your tax rate. Taxes on Retirement Assets: How to Pay Less has the details.
The Bottom Line
You're likely to read a lot of advice about timing your retirement and managing your income. One of the best rules is to remember that there is no one-size-fits-all solution. If you work with a financial planner and/or retirement advisor, you can develop a solution that is tailored to your needs and your income. Ideally, you should retire as early as possible and remember to rebalance your investment portfolio as often as necessary. Your financial planner can plan the best strategy and timing.