Top Retirement Planning Questions to Consider
Updated on Apr 17 2019
Retirement planning is more important today than ever before as Americans need to be proactive with their financial planning to make sure they have enough money for their last third of life. People are living longer and don’t have the same work retirement packages as days past, making retirement wealth planning crucial in the 21st century.
If you are age 50 or beyond, chances are you’re thinking about retirement. You’ve been working your whole life and are looking forward to leisure, or adventure, in your golden years. When thinking about retirement, though, it’s important to remember that the 5 to 10 years approaching retirement is a critical time for financial planning to help you ensure you reach your financial goals. In order to retire and enjoy the life you desire, you need to diligently forecast, plan and invest in in your retirement portfolio. Retirement planning is a strategic process that involves many decisions. Learn what you should consider when it comes to your retirement planning process and timeline.
To Retire or Not to Retire?
Determining the ‘Magic’ Age
The 21st century marks a time of retirement changes in America. Many people are living longer because of medical and technological advancements, but companies are not offering the same retirement pensions and packages they have in the past. Add to that, many seniors age 65 and older have not saved enough money for retirement, forcing them to work longer if they are able. Those who can’t work because of health issues often rely on government programs, such as Medicaid and the Supplemental Security Income (SSI) through Social Security – which is putting a tremendous strain on federal resources.
On the flip side, many fit and able seniors take pride in their work and want to work as long as possible. The key is to plan your future and save enough retirement finances to that you are able to enjoy the retirement lifestyle you want. Everyone is different and requires unique retirement planning and investing—which is why retirement ages can span the ages.
Keep in mind that while you may feel healthy and energetic now, you never know when your health could take a turn for the worse. As a general rule, you should plan on saving about 80% of your pre-retirement salary once you retire, including income from Social Security, pensions and other savings.
Here are a few questions to think about when considering your ideal retirement age and whether you can realistically make that happen:
1. What age can I retire?
Nearly half of Americans call it quits on work between ages 61 and 65 while 18 percent retire even earlier, according to data from LIMRA Secure Retirement Institute. By age 75, 89 percent of Americans have left the labor force, LIMRA says.
These retirement statistics no doubt include some people who can’t find work or who can’t work because of health problems. Still, early retirement can mean an income squeeze. In order to properly determine the retirement age that makes the most sense for your finances, if you have this luxury, you need to determine the following:
- Your financial goals
- Your discretionary and non-discretionary spend
- Your net worth
- Your cash flow
- Your debt
- Your investments
2. What does my weekly, monthly and annual retirement income look like?
Calculating your ideal retirement income retirement income can help you assess your retirement lifestyle. Is it enough to ensure a comfortable retirement? Also, what’s the right strategy to achieve this goal—or maintain it if you think you’re already there?
An expert financial advisor can help you consider retirement planning strategies to increase your net worth, and gain insight into the following:
- How much retirement income you can safely withdraw yearly from your portfolio
- Why your time horizon may be longer than you think
- Establishing a primary objective for your portfolio
- Common risks risks to your net worth
Figuring out this pertinent retirement information will help you gauge when you can realistically retire.
3. How will medical care affect my finances?
Medical expenses take a large chunk of your retirement savings. HealthView Services estimates that a 65-year-old couple retiring in the current year will need to have $275,000 to cover their health-care and medical expenses throughout retirement. Last year’s estimate was $266,000.
You’ll qualify for Medicare, the federal health insurance program, once you reach 65 (disabled people with unique situations may be eligible for coverage before age 65). Keep in mind that Medicare doesn’t cover everything, though. For example, Medicare covers basic health services, including hospital stays, doctor visits and prescriptions, but doesn’t include long-term health care, vision services, dental care and hearing aids.
Most likely, you’ll need the following:
- Supplemental health insurance – Primary sources of supplemental coverage include employer-sponsored plans, Medicaid, Medigap policies, and Medicare Advantage plans.
- Long-term care insurance – Long-term care insurance is an insurance product, sold in the United States that helps pay for the cost of long-term care, often not covered by health care plans.
- Health Spending Account (HSA) – The HSA flexible spending account lets you save pre-tax money for current and future health care expenses.
Your budget for health care will also depend on your health and medical costs in the area where you plan to retire. Making the right decisions about health care is important, and so are the decisions you make about your savings in the last few years before retirement. Consider your genetics and current health situation to adequately forecast your medical expenses during retirement.
4. How will social security timing affect my income?
While you are eligible to claim Social Security benefits as early as age 62, your monthly check could be nearly twice as much if you wait until you’re age 70. Before claiming your benefits, weigh your options:
- Consider working a few more years – If you can work a few more years or have other sources of income, delaying social security checks until age 66 or older will increase your monthly benefits by 33 percent or more.
- Gauge your payouts based on your highest years of earning – You can also boost payouts if you work longer as your benefits are based on your highest of 35 years of earning, meaning if you’re making more money, you can displace some of your lower-earning years.
Many people don’t full understand Social Security, so make sure to do your due-diligence with your Social Security retirement planning.
5. Do I have debt interfering with my retirement planning?
Debt will hold you back when it comes to investing in your future. If you’re paying off debt with interest, you’re not putting that money towards investments. In fact, many seniors today are in debt.
- Budget during your working years, so that as many major and emergency expenses can be managed through savings.
- Stick to the budget, so dollar limits are enforced on entertainment, food, clothes and holiday items you want but may not need.
- Optimize the amount saved for retirement through consistent contributions to IRA and/or 401(k) accounts.
- Educate yourself on the costs of debt, which far outweigh the costs of the item financed (even with today’s low interest rates).
6. Do I want to hire an expert financial advisor to help get me on track with the retirement planning?
As you get closer to retiring, make sure you’re doing everything you can to set your retirement planning and savings up for success. Senior Financial Advisor can help you find local, expert financial advisors and planners to help you get on the right track for retirement. An expert fiduciary financial advisor has your best interest in mind and can help you navigate retirement planning with confidence.
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