What You Need to Know About Retirement Money
You finally did it. You saved and saved, put in whatever you could, paid for the house, college, and everything else you needed to create life. You too have made some mistakes along the way, but everything has brought you here. You are now ready to spend time away from work.
This is the final article in the latest TwoCents series, What You Need to Know About Money at Any Age . Check out our other articles on what you should know before the 20 years of that , how to manage their money in age from 20 to 30 years , about the financial steps to be taken between the ages of 30 to 40 years, and that to do when you are approaching retirement at your age. 50s and 60s .
Here’s how to balance all your expenses on a fixed income.
You now have some free time, so why not read countless blogs and books on how to maximize your money in retirement?
- Walter Updegrave in Real Deal Retirement is , well, the real deal. Bookmark his site.
- Significant is a new site for people “who are redefining what it means to grow old and looking forward to what happens next.” Diane Harris, the former chief editor of Money Magazine (and my old boss), is an editor, and you will be hard pressed to find someone who thinks more about personal finance.
- Managed by Jonathan Clements, Humble Dollar is a more general personal finance site but with more detail and experience.
Manage healthcare costs
Medical care is likely to be one of your biggest costs when you retire, especially if you leave your job before you become Medicare eligible at age 65. When you turn 65, “the federal government subsidizes about three-quarters of the cost of Medicare Part B, although you will still pay substantial deductions and co-payments,” reports CBS News .
CBS advises that because Medicare has high out-of-pocket costs, you should explore additional insurance options, including:
- Get a Medigap plan that pays for part or all of Medicare’s deductibles and co-payments, combined with a separate plan that covers the cost of your Part D prescription drugs.
- Get a Medicare Advantage (MA) plan , which usually includes inpatient and outpatient care and prescription drug costs and usually covers most of Medicare’s personal expenses.
Another option is to use HSA facilities. As noted earlier, you do not tax this money — and you can use your HSA funds to pay your Medicare premiums.
You need to purchase dental and vision insurance that Medicare does not cover. On top of that, when it comes to prescriptions, there is Medicare’s infamous bagel hole: Once you and your insurer spend $ 3,750 on covered prescriptions (for 2018), a coverage gap begins that could leave you hooked on additional costs. …
However, some people retire before age 65, and often earlier than planned. To bridge the gap between employer insurance and Medicare, shop in the individual marketplace. Depending on your income, you may be eligible for an Affordable Care Act exchange subsidy. Significant examples of the benefits of subsidies include:
According to the Kaiser Family Foundation, a couple with one spouse who is 60 years old and the other 55 years old, with an annual household income of $ 55,000, will pay an average of $ 438 per month in a mid-tier silver plan.
If they weren’t eligible for the subsidy, their monthly premium would have jumped to $ 1,857.
Alternatively, you can explore the COBRA coverage. This allows you to continue to receive benefits for 18 months after you leave your employer, but at full cost (employer plans subsidize up to 80 percent of the cost of health care).
Take advantage of your full years
Monica Dwyer, a certified financial planner from Ohio, says there are three different phases of retirement: the early years when you “leave,” “when you travel a lot and cross something off your wishlist.” Then you will get to the “slow” years, when you start to slow down. “You no longer jump out of planes and travel is simplified, but not completely.” Finally, there are years in which you cannot walk, “when you cannot travel and it becomes more difficult for you to be active.”
You may have a separate savings or investment account for your summer plans. Sure, you’ll have to live within your means, but now is the time to go on the journey you’ve always dreamed of, renovate your home, or donate some money to charity.
You have named your assets correctly, so why not take a peek at the trust, which will also keep your assets private (as opposed to a will / probate). Trusts are not suitable for everyone, but Dwyer suggests creating them in a variety of circumstances.
“One for a child with special needs, regardless of age,” she says. “Most states have a law that says that all government aid ends if a person with special needs inherits above a certain wealth level, sometimes a very small dollar amount. Instead of direct inheritance, a person can use a trust for these assets. ” Trust can ensure their financial well-being.
And if you’re a wealthier person, you might also need one if you want to control how your heirs spend your money (or at least when they can access it).
“It’s tricky and you should work with a lawyer, tax professional, and financial planner to make sure they’re set up properly,” says Dwyer.
In general, make sure all of your accounts are in order, no matter what your end-of-life plan is.
Spouse’s death plan
If you rely on two Social Security payments, the death of your spouse can hurt your finances (not to mention the emotional cost). Thomas Walsh, a certified financial planner , says both spouses need to understand how your finances work and what to do if the other comes out first.
Life insurance is one option for making up for lost social security or retirement benefits. If you are over 65, Walsh said, it may make more sense to upgrade to a full life insurance plan to save money, rather than a term one.
In addition, “a financially savvy spouse should regularly inform a spouse who is less familiar with finance,” says Walsh. “Maintain a list of all current, savings, investment, and credit accounts you hold, and an estimate of the balance of each account.”
Both spouses must also have login details for all financial accounts, including online bill payments.
“Keep files of important documents such as insurance policies, wills and powers of attorney,” says Walsh. “Introduce your spouse to any of your professional advisors, including a financial advisor, tax preparer, lawyer, and insurance agent. They will most likely be some of the first people your spouse will contact after your death, so it will be helpful if you have already introduced yourself. “
Don’t be too conservative with your investments.
You may think you are done investing, but if you retire at 65, you may have 20 or 30 years of retirement. This means that while you should be moving towards a less volatile mix of assets, you shouldn’t be ditching stocks entirely.
“Being too conservative about investing in retirement is a mistake,” says Walsh. “If you have all of your savings in low-yield investments like bonds or CDs, you will have a hard time keeping up with inflation.”
Walsh advises maintaining a diversified portfolio of pension fund investments, including “large-cap US investments, small-cap US investments, international investments, natural resources and real estate investments.” You can easily continue to do this through mutual funds and ETFs.
CNN Money reports that most people are retiring and 40 to 60 percent of their portfolio is still in stocks. But it all depends on a number of factors that are unique to each person:
The combination that makes sense to you when you retire will depend on a number of factors, including how comfortable you are watching the value of your nesting egg bounce in response to market fluctuations, how likely it is that your nesting egg is the egg will last a long time, given the amount of withdrawals you plan to receive, what other resources (social security, pensions, net worth, annuity income, etc.) you should use if your savings bank starts to run out.
When you retire, it may not be comfortable for you to own even 40 percent of the stock. But don’t change your investment too much.
“Let’s say you plan to withdraw four percent of your total assets in your first year of retirement and adjust the amount to reflect inflation in subsequent years,” Kiplinger writes. “This speed of withdrawal is unlikely to deplete your 30-year retirement savings.”
As always, do what is right for you, but remember that significantly reducing your capital investment will reduce your purchasing power. As Walter Updegrave of Real Deal Retirement writes:
For example, if you retire at 65 and prices increase two percent a year for 20 years, it would take you nearly $ 75,000 at age 85 to buy what $ 50,000 would buy when you will retire for the first time. If inflation returns to its long-term average of three percent, you will need more than $ 90,000.
You cannot ignore inflation.
Yes, you will always have money problems. But you will also have freedom – you can do whatever you want, when you want. This could include traveling, mentoring, part-time work to keep the mind up, moving to a new city, blogging, playing music, writing a memoir – the list is endless. What will you do now that you are retired?
This is where we come to the end of our series of articles ” What to do with money at any age.” Hope you found it helpful. As always, if you have any questions about the money that you want, so I dug up, email me at email@example.com and read the rest of the series below.