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.

READ MORE

21st Century Planning: Risk-Based Retirement

What will your retirement look like? Do you plan to downsize your home? Stay at home more or travel more? Will you begin a new business or work part-time? Retirement prompts a lot of questions, and many challenges will be faced during those years. Planning with a risk-based mindset will make the process all that much easier.

Surprising facts about retirement:

  • Retirement will likely last longer than expected.
  • Few spend adequate time creating a plan. Most folks spend more time planning their vacations than they do retirement.
  • Many remain in the workforce in some form after retirement,
  • A lot of folks invest only in 401(k)s.

The best way to tackle the risks of retirement is diversifying your retirement portfolio.

Annuities:

Fixed or variable, annuities are a good way to add to your retirement income and diversify your funds. Fixed annuities offered guaranteed returns while variable annuities provide a higher yield but come with much more risk and potential loss. And when it comes time to retire, you can receive distributions calculated based off your life expectancy. This guarantees it for life!

Permanent Life Insurance:

Life insurance, while not often thought of, can provide tax-deferred income, and protect your family. You may access this money from your premiums in the form of cash-value such as loans or direct withdrawals. Note, however, that accessing the cash-value will reduce the policy benefit).

Long-Term Care Insurance:

Expenses may seem unforeseen, but that does not mean that during retirement planning cannot account for them. As we live longer, we are more exposed to needing long-term care. Long-term care happens when we are limited and unable to perform daily activities such as dressing or eating. And long-term care insurance can help with this!

The insurance provides coverage for at-home care, assisted living facilities, and even community-based care. Structuring of policies varies, some provide monthly benefit while others are structured with traditional life insurance (and may offer more death benefit if the long-term care is never used).

Important: planning continues and needs maintained during retirement, too.

READ MORE