How ready for retirement are you?

Quick Check: How Ready for Retirement are You?

Retirement readiness is not an overnight success story. It is not a simple formula either. It takes dedication, hard work, and good strategies. Why? Because it is simply not just retirement savings. Below is a quick check to assess your readiness for your golden years whether you are 5-10 or even a year away from retirement!

Financial Wellbeing

As the biggest stressor of retirement, financial wellbeing is budgeting, savings, income streams, and planning. Here are some categories to review for your retirement planning

  • Housing, including utilities and maintenance
  • Healthcare costs (covered later)
  • Daily living: food, transportation
  • Entertainment and travel

Having an idea of where you stand now will help determine how much you should have for retirement assets.

Emergency Fund

Planning for the unexpected helps immensely when it comes to retirement readiness. When there is financial uncertainty, the emergency fund is the perfect security blanket. Advised to be kept separate from normal savings, the emergency fund should have roughly 3-6 months of living costs.

Debt Elimination

The less debt you need to pay in retirement, the better off you will be. Retires are often relying on fixed income streams, so beginning a repayment strategy now while you are still working would be ideal. If you can, paying down debts with higher interest rates would save a lot of money for you down the road.

Retirement Needs
As a CPA, knowing what you need and how you want to life your retirement helps set realistic goals and plans. This should include where you want to reside, what age you plan to retire, and even length of retirement. With longevity increasing by the day, it is estimated that retirement will last between 20-40 years for many. While evaluating your needs, this is a great time to also compose a timeline for when certain benefits/income streams begin.

Healthcare & Insurance

Health insurance is a major factor for retirement, and unfortunately will be the biggest expense you will face in retirement. Not including long-term care, a newly retired couple will need a minimum of $300,000 for medical expenses alone. This number is predicted to increase yearly, too. Moreover, should you have a long-term care event, without coverage, you are looking at approximately another $140,000 annually.

Now part of health care costs is insurance. Medicare only covers so much, and that depends on the plans you go with. Other than Part A each Part or supplemental plan has a premium. You may need prescription drug coverage, which is where Part D of Medicare may help. Consider a supplemental plan under Part C. Do further research into what a private health insurance company may offer so you know what options you have and are able to get the best price for what you need. Long-term care insurance is another premium monthly, but it would help a lot should you need it. There are some options where you may add a rider to a life insurance policy to help cover the costs long-term care would entail.

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Medicare Mistakes That Could Uproot Your Retirement

Medicare is often the core health coverage for seniors during retirement. Knowing the ins and outs of the program is essential for your retirement finances. Following are some facts that may cause risks to arise in your retirement if not handled correctly.

Enrollment is not entirely free. Each part is broken down as follows:

Part A is typically free for seniors but has requirements for enrollment. This part is automatic and covers treatment in medical facilities.

 Part B costs and covers outpatient care and diagnostics. Much like Part A, Part B is automatic. Keeping premiums paid should be a priority in retirement.

Part C is Medicare Advantage, providing alternatives within the private sector. Plans vary based on state and individual needs.

Part D covers drugs prescriptions and has premiums.

However, with all health insurances, Medicare has deductibles, coinsurance, and copays that will impact your budget.

Be aware that price is not locked in the moment you begin Medicare coverage, Parts B & D will change yearly. This has the potential to affect your Social Security benefits. If you are signed up for monthly benefits, if Part B increases it will be deducted from your monthly check automatically. Now, you will not receive a lower monthly payment than you have if Part B increases—the cost adjustment is made with Social Security adjusts for cost-of-living.

Unfortunately, Medicare is only health care coverage—dental and eye are not included. Another common service/product not covered is hearing aids. If you would like that extra coverage, Part C, the private-sector market, is where you can group Part A, B & D together plus purchase plans with other coverage such as eye and dental. Otherwise, the services not covered are marked as out-of-pocket and may require you to use funds from an HSA or other retirement funds.

A huge factor with Medicare is enrollment timing. You have a seven-month span to enroll—three months before your 65th birthday to three months after that month. If you are unable to enroll during the original window, late penalties will be assessed to your Part B and Part D premiums indefinitely.

Having the information needed for success is important so you can make the right decisions for your retirement and health care needs. Medicare is a complicated government program that impacts your retirement head-on—sometimes even before you retire fully.

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