Are you on the verge of retirement and have many questions running through your head? Unfortunately, most people do when they get closer to that phase of their lives.
If you’re looking for answers, then look no further! We’ve compiled the most frequently asked retirement questions so you can learn more about what comes with leaving behind your working life.
From when is the best time to retire to how much retirement income you will need. There’s so much to consider before making this transition!
When can I retire?
Retirement is a big milestone in life that can seem daunting. So many factors come into play when deciding what age to retire, such as personal finances, lifestyle goals, and health.
One of the most common retirement questions asked is, “How early can I retire?”.
The answer depends on how much money you have saved for retirement and how long those savings will last through your retirement years.
As far as Social Security goes, the earliest age one can receive retirement benefits is age 62, though the amount received is less than if one waited until their full retirement age.
For those willing to wait, the full retirement age is currently between the ages of 66 and 67, depending on the birth year. Moreover, social security retirement benefits increase if one holds out until age 70. Once you hit age 70, benefits no longer increase.
It is important to note that retirement age is also determined by personal factors and goals, not just financial gain. Ultimately, the best time to retire is unique to each person and their individual circumstances.
What will my expenses look like in retirement?
Retirement is a time to enjoy the fruits of your labor and unwind from the hustle and bustle of work.
But have you ever stopped to think about what your expenses will be like in retirement? From everyday out-of-pocket expenses, to taxes, to medical expenses, it’s crucial to clearly understand what you’ll spend in retirement.
Medical expenses in retirement are a significant expense to consider, so it’s important to make sure you have a solid plan for covering them.
Out-of-pocket expenses, such as dining out or taking vacations, are also crucial to consider when considering your retirement expenses.
Remember that while some expenses may go down in retirement, some may increase. It’s important to create a realistic budget that accommodates these changes.
How much money will I need to retire?
Another big question we face is, “How much money will I need to retire?”
The answer, of course, depends on a variety of factors, such as your lifestyle, where you live, how long your retirement will last, and what you plan to do during your retirement years.
One common rule of thumb you’ll hear is that you’ll need to replace about 80% of your pre-retirement income to maintain your standard of living. However, that’s a blanket statement as it can vary widely depending on your individual circumstances.
A good way to help figure out how much you’ll need to save is to talk to a financial advisor who can help you develop a customized retirement plan that considers your unique needs and goals.
When should I begin taking Social Security?
Deciding when to start taking your social security payment is a big decision that can impact your financial future.
While you can technically begin collecting benefits at age 62, it’s important to consider the potential long-term consequences of starting too early.
Starting too early may mean a lower monthly payment and fewer overall benefits throughout your retirement.
On the other hand, waiting until full retirement age or later can result in higher monthly payments and a larger lifetime payout.
Ultimately, the best time to start taking social security benefits depends on your overall individual circumstances and financial goals.
Consult with a financial advisor to help determine the best course of action for your specific situation.
How do I apply for Social Security?
Whether you’re nearing retirement or simply preparing for the future, applying for Social Security benefits can take time and effort.
First, you’ll need to determine whether you’re eligible for benefits. If you’ve worked and paid Social Security taxes for at least ten years and are at least 62 years old, you likely qualify for retirement benefits.
You’ll also need to set up a Social Security account, which you can do on the Social Security Administration’s website or by visiting your local Social Security office.
Once you’re ready to apply, you can do so online, by phone, or in person.
It’s important to have all necessary documents (such as your birth certificate and tax statements) on hand when you apply to help speed up the process.
By following these simple steps, you’ll be on your way to accessing your Social Security benefits in no time.
Can I work and collect Social Security at the same time?
Many people wonder if they can work and collect Social Security simultaneously. The short answer is yes, it is possible to do both.
However, there are some rules and limitations to keep in mind.
If you are at full retirement age, there are no limits on how much you can earn and still receive your full Social Security benefit.
However, if you are younger than full retirement age, there are earnings limits in place. If you exceed those limits, your Social Security benefits could be reduced.
It’s important to understand the rules and limitations before making any decisions about working and collecting Social Security at the same time.
How will I pay for medical/healthcare expenses in retirement?
As we grow older, healthcare expenses increasingly become a significant concern. According to the Fidelity Retiree Health Care Cost Estimate, a typical couple who retires at the age of 65 in 2022 may need approximately $315,000 in savings (after taxes) to cover healthcare expenses throughout their retirement.
Although most retirees become eligible for Medicare when they turn 65, early retirees might face a period where they need to fill the void between the termination of their workplace benefits and the commencement of their government coverage. To do so, you may need to purchase an individual policy through the health insurance marketplace.
In addition, it’s important to be aware that Medicare may not cover all your healthcare expenses. That’s where long-term care insurance may be beneficial.
Long-term care insurance can provide coverage for medical care needed for extended periods of time, such as nursing home stays or in-home care.
It’s important to research your options and choose the right coverage to help ensure that your healthcare expenses are covered in retirement.
Will I have enough money to last through my retirement?
As retirement looms, many of us ask ourselves the big question: will I have enough money to last through my golden years?
A good way to help answer that question is by doing a comprehensive analysis of your financial situation. Here are some general steps to assess your retirement savings:
- Estimate your retirement expenses
- Calculate your retirement income needs
- Assess your retirement savings
- Perform a retirement income projection
- Consider inflation and longevity
- Consider your tax liability throughout your retirement years
- Adjust your retirement plan if you come across a potential shortfall
Figuring out your retirement income plan can be complex and we don’t suggest doing this alone.
By seeking the guidance of a financial advisor who can offer personalized advice based on your unique circumstances, you gain access to their knowledge and objective perspective, thereby strengthening your retirement planning process.
Should I pay off my mortgage before retirement?
Retirement is supposed to be the time of your life when you finally get to relax and enjoy the fruits of your labor.
However, the thought of living with the burden of a mortgage payment can put a damper on that dream for some.
So, should you pay off your mortgage before retiring? The truth is, no one answer fits all situations. It depends on your financial goals, retirement plans, and personal preferences.
Some people opt to pay off their mortgage early to reduce financial stress and increase cash flow in retirement. Others keep their mortgage and invest the extra money for potentially greater returns.
Ultimately, the decision to pay off your mortgage before retirement comes down to what makes sense for your unique financial situation and long-term goals.
How will taxes affect my retirement savings?
Regarding retirement savings, taxes can affect how much you end up with.
Depending on your retirement account type and your income withdrawal strategy, you may owe taxes on the money you withdraw when you retire. This can reduce the amount of money you can take home.
On the other hand, some retirement accounts offer tax benefits, which can help reduce how much you will owe in taxes in the long run. Therefore, educating yourself on the tax implications of different retirement accounts is important to make informed decisions about your savings and withdrawal strategies.
Speaking with a financial advisor is important to help maximize your savings potential as they may have strategies that can help you pay less taxes in retirement.
Do I need to make adjustments to my retirement portfolio when I retire?
Are you approaching retirement and wondering about your retirement portfolio? It’s a smart question to ask. This is because as retirement draws near, you transition from the “accumulation” phase to the “distribution” phase. Each of these phases demands a distinct level of strategic planning.
During the accumulation phase of retirement, you are working and actively saving money to build your nest egg over a number of years. The focus during the accumulation phase is on saving and accumulating wealth to provide support during retirement.
The distribution phase refers to the period when individuals begin to withdraw the assets they have accumulated during their working years. During this phase many retirees now rely on multiple income streams – instead of one – to fund their retirement which requires careful planning to help ensure their assets are managed and allocated in a way that sustains a retiree’s financial needs throughout retirement. As there are more moving parts, this phase requires more complex planning.
Depending on your unique financial situation and personal goals, making some adjustments to your portfolio may be beneficial. It’s a good idea to consult with a financial advisor to determine if any changes need to be made and to help ensure your retirement plan is on track.
Remember, retirement is a different phase of life, and your portfolio should reflect that.
Should I take my pension as a lump-sum?
The decision of whether to take your pension as a lump-sum or not can be a tough decision that requires careful consideration with the help of a financial advisor.
Taking a lump-sum may seem appealing as it provides a chunk of cash all at once, but that may not be your only pay-out option that is best for your financial circumstance.
It’s important to do your due diligence, research your options, and consult a financial advisor.
Some factors to consider are your current financial standing, future income sources, taxes, and potential investment opportunities.
Of course, the decision ultimately depends on your unique circumstances.
How should I withdraw income from my accounts?
A big question that people have when it comes to their retirement savings is how to withdraw income from their accounts effectively.
The reality is that everyone’s situation is different. When it comes to your retirement income plan, here are some general factors to consider:
- Understand your financial goals
- Assess your cash flow
- Prioritize tax-efficient strategies
- Establish a withdrawal schedule
- Monitor and adjust as time goes on
Ultimately, it’s important to work with a financial professional to help determine what income strategy will work best for your unique financial situation. A financial advisor can help provide personalized guidance and help you make the most appropriate decisions regarding your income withdrawals.
If you have any questions regarding your retirement, contact Intelliplan Financial today to help get the guidance you are looking for. Schedule a complimentary consultation today.
Disclosure: Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC-registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Intelliplan Financial and PCA are separate, non-affiliated entities. PCA does not provide tax or legal advice. Insurance services offered through Intelliplan Financial are not affiliated with PCA.
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Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Intelliplan Financial and PCA are separate, non-affiliated entities. PCA does not provide tax or legal advice.
