No one wants to work forever, but the retirement you enjoy will be the retirement you planned for. On the one hand, you could have sandy beaches and vacation cruises. On the other, you could be stuck clipping coupons and picking up odd jobs to make ends meet.
Smart planning is the difference between golden years and fool’s golden years. Here are five great tips to make sure your retirement is as relaxing as you deserve.
1. Plan Your Estate
Divvying up your pre-retirement assets can leave you feeling pulled in multiple directions. You need enough savings to live on during retirement, but you also may want to be sure both older and younger family members are cared for if you pass away prematurely. Estate planning is sometimes complicated for baby boomers, since their parents are living longer than was typical in previous generations, and their children are more dependant than was typical in previous generations. This phenomenon has economists dubbing baby boomers “the sandwich generation.” The considerable expenses associated with caring for elderly parents may have to be weighted with the pressure to leave something behind for children and grandchildren. Often, boomers experience a great deal of uncertainty, since you probably have no idea exactly how long aging parents will be around, or exactly what your childrens’ needs will be. Our Estate Planning Center is a great place to start.
2. Understand Your Entitlements
Although most baby boomers can begin claiming social security any time between ages 62 and 70, eligibility for full benefits occurs at age 66. Medicare kicks in at age 65. Some boomers retire early and live off either savings, partial or spousal social security payments, or a combination. If you are able to delay claiming social security until you reach age 70, your monthly benefit amount will increase to your maximum payment. This figure is typically 76 percent higher than it would have been had you started claiming social security at age 62. If money’s tight, you may prefer to put retirement off until you are eligible for the largest possible payout. What if you can’t wait that long? If you have some retirement savings, you may decide to live off of it exclusively until you turn 70.
3. Overhaul Your Investments and Insurance
This isn’t the time to invest everything you own into Facebook stock. Generally, baby boomers with retirement on the brain are likely to shy away from the high-risk investments they may have preferred when they were trying to establish wealth. As you plan for retirement, you’ll probably focus more on keeping your assets secure than you will on generating the highest possible returns. Your financial planner should be able to customize an investment strategy that will be more likely to protect against major losses. While you have your financial planner’s attention, you should also re-visit your insurance policies. Life insurance could become less important as you embark on retirement, and you may want to consider replacing some of your coverage with long-term care insurance.
4. Start Living Like a Retiree
Retirement isn’t all senior discounts and early-bird specials. It can be expensive.
Going from a full time job to a fixed income is a major adjustment. It’s never too early to start making some budget cuts. Calculate the monthly amount you will be taking in from social security, savings, or other sources after you retire, then try to live on it. If you are successful, put your extra earnings that haven’t been spent into savings. If you are unsuccessful, keep trying until you get the hang of smaller scale living, or delay retirement until you’re able to draw in a more comfortable allowance.
5. Touch Base With Your Employer
In addition to the common courtesy of letting your employer know you may soon need to be replaced, you should also begin to gather information about your benefits. Will your medical benefits continue into retirement? What needs to be done so you can start collecting from your pension or 401K? Some employers may offer boomers the option to phase out of their careers, usually while working part time and collecting partial benefits. This can be helpful if you are waiting for medicare or social security to kick in. It also may help you more easily transition from full-time work mode to full-time retiree mode.
Retirement could be the most rewarding part of your life, so plan ahead and enjoy it!