Planning for Financial Fitness at Retirement

Planning for retirement often feels like a guessing game. How much will I need? When will I retire? What if my health changes? There are many aspects of our lives that must be taken into consideration and we often lack a clear method for tackling these tough questions. The information below is meant to help you begin developing your retirement plan or help you evaluate where you are in the planning process.

Retirement lifestyle

What does retirement look like to you? For some, retirement is being at home enjoying quiet days spent with family and friends. For others, retirement means traveling and seeing the world. In either case, you need to have an idea of what it is going to cost you to live as a retired person. Work to plan your retirement around the things that are most important to you. Think about what you value and how much it will cost for you to live the life you would like.

The typical industry standard for retirement savings is an accrual of 10 to 15 times your annual pay. These figures take into account that you will bear more of the cost of your medical expenses once you retire. It also considers that medical expenses will likely increase as you get older.

Date of retirement

When you retire is one of the most critical decisions you will make. Things to consider include:

  • Amount of assets real (property) and liquid (cash) that you have.
  • How long you estimate that you will need your retirement income.
  • The impact of inflation on your income.
  • How much income you will withdraw and at what increments of time.

Rather than fully retire at a certain age, many people elect to work full- or part-time in order to supplement income or increase the amount of earnings they will have from Social Security. Deferring retirement to a later age may also help you add assets in your retirement accounts and shorten the length of time that you will need to draw from your assets.

Also, if you are over 50 years old and contribute to a 401(k) account, you may be able to make catch-up contributions towards your retirement. Speak to your plan administrator and check with the IRS for more information on guidelines and contribution limits.

Health care

Planning for your health care as you head into retirement is an investment well spent. Our medical needs change as we age. It is important to know what your resources are as well as to plan for the wraparound coverage you will need. Here are some basic items to look into:

  • Does your employer offer any type of retiree medical coverage? While it is uncommon for employers to offer this coverage, some public employers, unions and a few private employers still do.
  • Medicare is the national health insurance program for people age 65 and older. Have a clear understanding of the medical coverage Medicare provides and what it will cost you for Medicare premiums. Typically Medicare does not cover expenses such as dental care, eye care, and long-term care. If you know you will have these types of expenses, look into other supplemental insurance coverage.
  • Medicaid is another health program that can help with expenses not covered by Medicare, such as long-term care. Medicaid eligibility is usually based on income and assets. If you qualify based on income, you may be asked to reduce or "spend down" the assets that you have in order to use the medical coverage.
  • You may also opt to look into private health insurance. Following are some items to look into when exploring private health insurance:
  • What benefit coverage is offered for prescriptions, long-term care, preventative care, specialists, emergency care, etc.?
  • The cost of enrolling in the plan, copayments, and the amount of deductibles that must be met per type of coverage.
  • Whether there are limits to the amount the insurance company will pay out over a year and over the life of the plan.
  • What the insurance company's rating is with the Better Business Bureau.
  • The Washington State Insurance Commission's website, which provides an overview of the complaint records of health insurance companies doing business in Washington State.

Retirement is a time for enjoying life. With a little research and preparation, you can ensure you have the resources necessary to accomplish the goals you have set for this time. If you need assistance in navigating the road to retirement, reach out to experts you can trust. These include your employer, nonprofit agencies such as Senior Services, the Association of American Retired Persons (AARP), and more.

—Becky House, American Financial Solutions

Becky House, education and communications manager for American Financial Solutions, a nonprofit credit counseling agency and division of the North Seattle Community College Foundation, is active in the Seattle-King County Asset-Building Collaborative.

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