So many of our clients come to us within a few short years or less before they plan on retiring. Once they do, they say they visualized a retirement far different from the one they actually are experiencing. Before they stopped working, they thought retirement would be a carefree life where they could do what they want when they want. They imagine there will be no financial issues and few responsibilities.
1. Retirement Income Strategy
When you retire, you need to come up with a draw-down strategy that’ll provide you with lifetime income, while minimizing taxes. How many times have you done something for the first time and got it exactly right? Well, most folks I know only retire once. We’ve literally helped hundreds of clients through this process, so it prudent to hire a fee-based CERTIFIED FINANCIAL PLANNER™ practitioner to design a personalized retirement income strategy for you.
2. Tons Of Free Time
Before our client’s retired, they read a lot about retirees having all this free time to do whatever they wanted. I can assure you that doesn’t always describe their retirement. For example, they often spend more than half their time as the primary caregiver for a loved one or parent.
3. Working In Retirement
Many of our clients have assumed they’ll be able to work part-time to supplement their perceived or known income shortfall. What if you have a health issue that prevents you from work, you can’t find a position? Or, what if you become a caregiver for a parent that becomes seriously ill? Never bank on working after retirement for financial reasons. There are too many unknowns.
4. Long-Term Care
After watching my mother struggle for 2 years with cancer, I know the importance of having some sort of long-term-care plan for your waning years. During the last two years of my mother’s life, she needed help with many daily activities, including bathing, eating and dressing herself. Medicare generally doesn’t provide long-term care. Thankfully, since she had a Long-Term Care insurance policy, most of the expense was covered. Otherwise, my sisters and I would have had to foot the bill. If you don’t have the proper coverage, you’ll likely need a family member or friend to be there for you.
Many never really think about the effect of taxes on their retirement. Most know they have to pay taxes on distributions from traditional IRAs, rollover IRAs and 401(k) accounts. But have you taken the time to calculate how your taxable income would affect your Social Security benefits and Medicare premiums? How much you pay for Medicare Part B and the taxes you pay on your Social Security income are determined by your income level. When you start your required minimum distributions, your retirement accounts at age 70½, your Medicare premiums will increase and you’ll be taxed on 85% of your Social Security benefit.
6. Spouses Home Together
This can be a difficult time for couples. During your working years, you don’t spend as much constant time together. When you retire, you might need to adjust to each other’s habits and quirks. The wife may complain about having her husband underfoot all day and he may get real tired of her giving him that endless honey-do list every morning. She might like it quiet in the morning but when he gets up, he blasts the television. Sitting down to think through and discuss these matters before you retire will help.
7. Social Security
A new study finds that only 4% of retirees start claiming their Social Security benefits at the most financially optimal time. And current retirees collectively will lose $3.4 trillion in potential income to fund their retirement because they started drawing benefits at a less than ideal time. That's roughly $111,000 per household, according to the research from United Income, an online investment management and financial planning firm. Analyzing and planning for both spouses’ benefits is a critical decision that will have huge financial impacts on your retirement cash flow.
8. Health Care Expenses
Most questions center around health care expenses and how to cover them and the ABC’s of Medicare. Medicare doesn’t cover dental expenses and routine eye care. There can be some major out-of-pocket expenses for costly dental procedures. When you retire, you need to make sure you have the right health care coverage—or you could face unexpectedly high out-of-pocket expenses.
Opinions expressed are not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Past performance is not a guarantee of future results. Investing involves risk and investors may incur a profit or a loss.