Planning to retire soon? If so, now may be your last and best opportunity to overcome any remaining financial challenges. You might use this time to ramp up your savings, pay down debt or improve your risk management strategy. Of course, it’s not always easy to identify gaps in your planning.
A financial professional can help you strengthen your financial foundation as you head into retirement. If you’re not working with a professional on your retirement strategy, now may be the time to do so. Below are three key questions to answer:
Will I have enough income in retirement?
This is perhaps the most pressing question every retiree needs to answer. Your financial success in retirement depends on your ability to generate more income than expenses. While you may have income from Social Security and a pension, many retirees find that they need additional sources of cash flow to support their desired lifestyle.
Your financial professional can help you project your income and expenses so you can develop a budget. You can then use that budget to identify gaps and take action. You may find that you need to save more in your final few working years. Or you could find that you need to scale back your retirement plans. Your financial professional can help you decide on the most appropriate action items.
How will health care costs impact my budget?
Many retirees assume that Medicare will cover all their health care costs. That assumption is usually a mistake. Medicare is a valuable resource, but it doesn’t cover everything. It covers only a portion of most costs, and some treatments and services aren’t covered at all. That means you could face out-of-pocket costs for things such as deductibles, copays, premiums and more. In fact, Fidelity estimates that the average retired couple will spend $275,000 on health care expenses.1
A financial professional can help you develop a plan to minimize the impact of health care costs on your retirement. Your plan may include the use of a health savings account or a supplemental health care policy. You might also consider long-term care insurance, as Medicare usually doesn’t cover long-term care.
Should I wait to file for Social Security?
Social Security is likely to play a role in your retirement income mix. However, the amount of your benefit depends on a number of factors, including when you decide to file your claim. You can file as early as age 62, but you’ll see a reduction in your benefit if you file before your full retirement age (FRA). Most people reach their FRA between their 66th and 67th birthdays.
You can delay your filing past your FRA. If you choose to do so, you’ll see an increase in your benefit amount. Social Security offers an 8 percent annual benefit credit for every year you wait past your FRA. If your FRA is 66 and you wait until age 70, you’ll receive four years of 8 percent credits, for a total of a 32 percent increase.2
Delaying your filing will lead to a higher benefit amount, but that doesn’t mean waiting is the right answer for you. Your decision should be based on your specific needs and objectives. Perhaps you can’t wait to retire and have no other source of income. Or perhaps you have multiple sources of income and can afford to wait with some shrewd planning and budgeting. Again, a financial professional can help you make an informed decision.
Ready to develop your retirement strategy? Let’s talk about it. Contact us today at Grand Canyon Planning Associates. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.