As you approach retirement, you may find yourself with many questions, making the process of transitioning into retirement seem somewhat intimidating. The best way to begin is by creating a clear vision for your retirement. Without a clear vision, how can you plan for it? Thinking about a few key points ahead of time can help you focus your efforts and minimize the anxiety that often accompanies the shift.
- Reassess your living expenses. An important thing to consider is how your living expenses could or should change. For instance, while commuting and other work-related costs may decrease, other budget items may increase. Healthcare costs, in particular, may rise as you proceed through retirement. Keeping a close eye on your spending, while being true to your saving/spending nature, in the years leading up to retirement can help you more accurately anticipate your budget during retirement. Remember – savers pre-retirement tend to be savers post-retirement; likewise for spenders.
- Consider all your income sources. Figure out how much you stand to receive from Social Security. The amount you receive depends on your earnings history and other unique factors. You can elect to receive retirement benefits as early as age 62, but doing so will result in a reduced benefit for the rest of your life. If you wait until your full retirement age or later, your benefit will be higher. Review the accounts you’ve earmarked for retirement income, including employer benefits, as well as any IRAs and traditional investment accounts you may own. Do you have rental income? Might you continue to work in some capacity? Such income can provide a cushion that helps retirees postpone tapping into their investment accounts.
- Manage taxes. As you think about when to utilize your various resources for retirement income, remember to consider the tax impact of your strategy. Managing retirement income to result in the best possible tax scenario can be tricky. You may want to count on qualified tax and financial professionals for help.
- Account for health care. As you age, the portion of your budget reserved for health-related costs will likely increase. Health care should get special attention as you plan the transition to retirement.
Wickham Financial & Insurance Services is a Registered Investment Adviser. The information contained in this article is solely for informational purposes.
