“Countless questions arise as you're planning for retirement. How much do you need to save? Could you be saving more? When do you plan to retire? Can you actually retire at that age and live comfortably?”
Retirement planning can be downright exhausting and overwhelming. As Motley Fool’s recent article, “Don't Even Think About Retiring Until You Can Answer These 3 Questions” explains, this can also frequently result in people just avoiding these questions and hoping that all their retirement concerns will simply work themselves out.
Can you believe that just 38% of Americans say they have a long-term financial plan, according to a recent survey? There are plenty of questions to be asking yourself before you retire, but there are three that can significantly decide if you're actually ready to say goodbye to working. Let’s look at these three important planning questions.
When to claim Social Security. Many people think that retirement and claiming Social Security benefits occur at the same time. However, they don't have to. You could elect to retire at age 60, but wait to claim your benefits until you reach 65. Remember that the amount of money you get in benefits, is linked to the age at which you start claiming them. Age 62 is the earliest you can claim Social Security. However, if you do, your benefits will be reduced by up to 30% of what they could be. For every month you wait, you'll receive slightly more with each check up to age 70. Your full retirement age (FRA) is the age when you’ll get 100% of the benefits to which you’re entitled. Waiting can have its advantages, but there's no single right answer for when you should start claiming. It all depends on your personal circumstances.
Will your retirement savings last? Take a look at how far your savings will last during retirement. To determine how far your money will go, calculate the amount you'll need each year to get by during retirement. With a number in mind, you'll be able to better determine how long your current savings will last. You might realize that you need more than you anticipated, especially if you're going to be spending several decades in retirement.
Paying for healthcare costs. Healthcare costs are one of the largest expenses in retirement. Know that the average retiree spends about $4,300 per year on out-of-pocket healthcare expenses. A total of two-thirds of that is spent on premiums. It’s important to understand that Medicare will help cover many healthcare expenses you'll face, but it doesn't cover everything.
It's hard to know the perfect time to retire, and you may never be 100% certain that the time is right. That’s all right if you've thought it through and can answer these important questions you'll face during your retirement journey.
Reference: Motley Fool (October 9, 2018) “Don't Even Think About Retiring Until You Can Answer These 3 Questions”