By: Joe Baker
Learn more about Joe on NerdWallet’s Ask an Advisor
Being in the financial planning arena, I constantly think (and fret) about planning for retirement for my clients, as well as for me and my wife.
So I thought I would share a couple of items that I think everyone should address if they are within 5 years of retiring:
- Put a plan together
You don’t need to be wealthy to sit down with a financial planner or retirement specialist. The earlier you begin creating a retirement plan, the easier it will be to manage in the future. The value of a professional who can integrate all of your income and savings into a cohesive plan cannot be understated.
- Maximize your social security benefits
Many people want to begin collecting their social security benefits when they first become eligible at age 62. What many people don’t realize is that the amount of benefits you receive scales with the age that you begin receiving benefits. The longer you wait to start collecting, the greater your initial annual income. The payments received if you begin collecting at age 70 (when benefits no longer increase) are nearly double those you would receive if you begin at age 62.
Of course, you have to have other retirement assets to live off of if you plan on delaying your social security benefits.
- Don’t Underestimate Future Healthcare Expenses
The first unknown to consider is the potential length of your life. If you retire at age 65 and live until age 90, that’s 25 years worth of income and expenses you need to account for. Medicare and Medicaid can help but there are many things they do not cover. You may even find yourself ineligible based on your net worth.
The best way to reduce these potential costs is to remain active and healthy as you age. Preventative exercise in your 60s is a great investment for your 80s. You’ve worked hard to reach retirement and you should invest in your ability to enjoy it. A serious illness for yourself or your spouse could possibly destroy your savings.
Fidelity estimates that a 65-year-old couple will incur $220,000 in medical expenses during retirement.
There are many more things to consider as your retirement years approach and the best way to address them is to put it all down on paper (a plan) and take action before you sail off into the sunset.