Ready to Retire? Read this First.
Much of the information provided on retirement planning involves financial considerations, but thinking about lifestyle choices is very important. How do you want to spend your time? Travel, hobbies, and volunteer work (think Surrey!) are all pursuits that can be enjoyed in retirement. Retirement does not have to be an all or nothing decision--many baby boomers work part time to transition into retirement.
Evaluate your financial situation and determine if your retirement savings and sources of income will be adequate to provide the lifestyle that you envision after you retire. It may be helpful to meet with a financial planner to provide guidance on planning. By increasing savings or continuing to work part time, retirement may become a reality sooner.
When thinking about retirement income, one of the primary sources is social security, so it is important to maximize your benefits. Generally, delaying benefits will result in a higher monthly benefit, while taking benefits early will result in a lower monthly benefit. Because social security provides spousal benefits, there are also strategies for couples to maximize their total benefits over their lifetimes. T Rowe Price, the investment firm, has an online tool called the Social Security Benefits Evaluator that can be used to calculate future benefits based on individual goals. Simply go to www.troweprice.com and search for “social security benefits evaluator.” The tool can be accessed by everyone, so you don’t need to be a T Rowe Price accountholder to have access.
Retiring with Debt
Pre-retirees should evaluate their debt, just as they evaluate assets. With interest rates being so low, it’s tempting to retire with debt, especially a mortgage. Think about whether you will be able to continue to make the payments after retirement. If the monthly payments are too large a portion of your income or could be a burden, then consider paying off the debt. By retiring without debt, your monthly cash flow will be larger and allow you to spend money on other things that you enjoy. If you will worry about losing your house should your financial situation change and you can no longer make the payments, then you should think about paying off the mortgage.
Given the high cost of medical care, it is important to have adequate health insurance either through Medicare or an employer plan. Medicare is available for those age 65 and older, but it does not pay all medical expenses, so it is important to have a supplemental policy, as well as a Part D Prescription plan. If you are retiring before age 65, make sure you have another affordable source of health insurance.
One Final Note
If you are married, it is very important to discuss these topics with your spouse, so you can both understand each other’s goals and how they can work together. Retirement planning involves choices that will affect both spouses, so communication is key.