Thinking ahead can spell the difference between a successful retirement with enough money and a stressful one. Here are 7 retirement considerations that every investor should think about:
1. Understand Social Security. The goal with Social Security is to optimize the amount you receive per month when you finally retire.
The earliest age you can start Social Security is 62. If you retire at 55 or 60, then you might want to claim it as early as you can. But if you plan to work past 70, like many, there is no reason to take Social Security before then. Doing so reduces the amount you can receive at your full retirement age (66 for baby boomers born before 1954). You can have a bump in your benefits every year you postpone taking Social Security. That bump is often a better deal for you than starting early and taking the most money you can.
2. Are you going to work after you retire? Your retirement might not be retirement. It could be about doing something different. Maybe you decide to work part-time in the industry you spent decades in, or in an entirely different field. Part-time work brings in extra money and occupies your time. If this is what you want, then factor it into your plan. Hopefully, if you decide to work, it’s because you want to, not because you are short on income and have to. That’s where the strength of your regular savings comes in.
3. What happens if you get really sick? No one likes to think about it, but a major illness can derail even the best financial plan. You need to consider what will happen to your life if you become incapacitated. Medicare doesn’t cover all your health-care expenses, like nursing homes. There’s a good chance that you’ll need to pay for uncovered extras, but will lack sufficient income during the worst of your illness. What would you do if that occurs?
4. Where do you plan to live? Your home during your working years may be too costly in retirement. What if your business didn’t do as well as you planned, and you sold it for less money than you expected? Maybe you will have to move to a less expensive place, where you can continue to live as comfortably as before. Uprooting your household will cause you some inconvenience, but maybe not so much that you’ll have to seriously change your lifestyle.
5. You’re going to feel strange not working. Not going to work every day takes some adjusting. You might feel lonely. Your phone is going to ring less often. The people you spent tons of time with will just fall off the map. You might feel that no one likes you. These are called the retirement blues. You might think you’re prepared for all those newly empty hours, but most retirees are not.
6. Timing could make or break you. If the market melts down in the first few years of retirement, you’ll likely have much less money than you planned. You might have to spend your nest egg faster than you expected. It’s a good idea to stress-test your finances by assuming you might lose money at the outset of retirement.
7. Make a financial plan. You need one to prepare for both the best and the worst possible outcomes. Part of that process is scenario analysis, which gives you an idea of how much you stand to lose under the worst case. Test your portfolio to make necessary adjustments. You might decide to postpone retirement, or to change your retirement goals.
Doing a financial plan once is not enough. Every year, you need to dust off the plan and go through the tests all over again. What you don’t want is to get to retirement and find out your assumptions never came true.
We encourage you to arrange some time to discuss these 7 retirement topics with your financial consultant.
Copyright® 2019 RSW Publishing. All rights reserved. Distributed by Financial Media Exchange.
The information and general descriptions contained in this article are designed to help you understand about the factors that you should generally consider when evaluating the appropriateness to your retirement plan of any strategy or investment. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; they are not intended to be viewed or construed as advice or a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. This document was prepared for informational purposes only and should not be considered as an advice of any kind. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting, or tax advice. Should legal, accounting, or tax advice be required, the services of a competent professional should be sought. Investment products are not insured by the FDIC, are not deposits or obligations of and are not guaranteed by Banco Popular de Puerto Rico or its subsidiaries or affiliates, and may lose value. Insurance products are not insured by the FDIC or other government agencies, are not deposits or obligations, and are not guaranteed by the Bank or its subsidiaries or affiliates. Some insurance products may lose value.