How to Prepare for Retirement
Only a few more years to go, and I’ll be able to retire. But before I break out the golf clubs and buy that RV, I better do some serious planning. There’s lots of questions I need answered. How much money will I need? What about my health insurance? How long should I plan for? Do I want to stay where I am, or be adventurous and live in some tropical paradise sipping margaritas on the beach all day long?
BUDGETING FOR RETIREMENT
Well, first things first. Guess I better figure out how much money I’m going to need, and how long I’ll need it to last. Since I’ve made it this far, I’d like to stick around a while and enjoy the fruits of my labor. Think I’ll make a list of the most important points so I don’t forget them.
1. How will these changes impact my budget both positively and negatively? I may lose my health insurance, so I better look at some other options. I wonder if I should keep my home, or maybe sell it and move somewhere smaller? I might save quite a bit in taxes and utilities, since these always seem to be increasing.
2. What kind of lifestyle do I want to live? Should I be frugal or live a little? Guess this will depend on how much if any traveling I want to do, how much golf I may want to play, how many times I want to eat out and so on.
3. Some payments like my mortgage will be history, but I may still have a car payment and some credit card debt. I better factor those into my plans.
4. Since I’m planning on retiring at age 55, I’ll probably be sticking around for many years. The savings account needs to be as big as possible, otherwise I’ll wind up tapping into my IRA’s and other retirement funds.
5. Oh yeah, there’s inflation and taxes. Those can cause me to lose buying power over the years. Better think about increasing my investments and catching up on any late payments and old debts before then.
INCOME FOR RETIREMENT
Now that I’ve got the budget started, guess I better figure out where the money’s going to come from for me to live on. You can’t count on pensions these days, but there are still plenty of sources of income out there for me.
1. Social Security
2. Retirement Accounts like 401(K), IRA’s and Keogh’s
3. Pensions–only 37% of retirees have these now, but it’s a pretty reliable source of income if it’s available.
4. Savings Accounts and CD’s
5. Stocks and mutual funds–there’s lots of fluctuation in the market, so this one’s falling out of favor with many of us for generating dependable retirement income.
6. Home equity–you see lots of commercials for reverse mortgages, but these should be looked at very carefully before pursuing–a last resort option.
7. Annuities and insurance
8. Inheritance–nice work if ya’ can get it, but don’t count on it. Your benefactor may outlive you!
9. Rental income and Royalties–real estate is always a good investment, and if you’re an inventor, author or musician, that royalty check in the mail is always nice!
10. A job–if all else fails, you can always go back to work part-time. But the inheritance sounds better, don’t you agree?
HEALTH CARE FOR RETIREMENT
I feel pretty good now, but what happens if I get sick after I’ve retired? I’ve got health insurance now, but what about later on? Here’s some options I could consider.
1. Medicare–you better start familiarizing yourself with this before you become eligible for it, otherwise you’ll be scrambling for answers. You’re eligible at age 65, but it doesn’t pay for everything. Expect to have some out-of-pocket expenses, unless you’ve got supplemental coverage.
2. The ABC’s (and D’s) of Medicare–Part A pays for inpatient hospital care, skilled nursing and hospice care. Part B is for doctor’s visits, outpatient hospital care, physical therapy and home health. Part C is often called Medicare Advantage, a health care plan managed by private insurance companies and approved by Medicare. It combines Parts A, B and sometimes D. And speaking of D, it covers prescription drugs.
3. Medigap and Supplemental Coverage–these are sold by private insurance companies and cover whatever Medicare doesn’t pay for. If you have lots of health issues, these can save you lots of money over the long run.
4. COBRA–If you plan to retire before age 65, like myself, you’ll need coverage before Medicare. COBRA covers retirees up to 18 months before age 65. You can also see if your HR department offers retiree health benefits, or you can price some policies through private companies.
TRAVELING FOR RETIREMENT/WHERE SHOULD I RETIRE?
Finally the fun stuff! Time to take it easy, but where should I go to take it easy?
1. Visit the kids and grandkids–see the sights while you see the kids.
2. Visit places you always dreamed of–the Grand Canyon, Italy, maybe Disneyland.
3. Sell the ol’ homestead and buy an RV–it may take some getting used to, but if you love the freedom of the open road there’s nothing better!
4. Take a cruise–there’s lots of great deals out there, and everything’s included–food, drinks, entertainment. Visit Hawaii, the Caribbean or Alaska.
If you have a passion for traveling abroad, perhaps you should take the ultimate plunge and move to another country. This is a great option for adventurous retirees because the cost-of-living is much lower than in the US. While many retirees call Florida or Arizona home, others opt for locations like Mexico, Costa Rica and Malaysia. A couple can own a nice home, have high-quality health care and see the sights for as little as $500-600 per month. That’s what I call living!
Well, there you have it. There’s lots to think about, but as you see retirement is a world filled with possibilities!
Retirement is quicker and easier than you think, just use our retirement calculator to see how quickly you can retire!.