It pays to be prepared.
If you wait until you reach retirement age to prepare for what life will look like, you’ve waited too long.
You should start planning early and gather as much information as you can in order to be as well-informed as possible.
Knowing your options and taking control of your financial future – it’s empowering.
Getting all your ducks in a row can be helped along by having a timeline to follow.
Here’s a look at how to plan for retirement via retirement savings plans, Medicare and Social Security.
Retirement Savings Plans
If your company offers a 401(k) or another retirement savings plan, you should take advantage of it. Contribute as much as you can because such an offering can end up being a significant part of your future income.
Often, employers will contribute as well, sometimes going as far as to match what you put in. Find out how much you need to supply in order to get the maximum amount from your company.
An important element to remember is to leave your retirement savings account alone! Don’t touch it! The longer it’s there, the more it will grow, besides the fact that removing it before age 59 ½ may cause you to lose a substantial amount and possibly have to pay a penalty.
Each plan is different, so you should talk to your Human Resources department or an external advisor to make sure you have a clear understanding of how to maximize its potential.
You should also re-evaluate your plan and what your needs are each year.
Part of your decision of when to retire will depend on when you choose to start receiving Social Security benefits. When you wait until you reach full retirement age, you’ll receive your full benefit. If you wait beyond that age, you can increase the amount of your benefit by approximately 8 percent each year you delay, up to age 70.
If you begin receiving benefits before you reach your full retirement age, the amount you receive each month will be reduced by approximately 30 percent. That number will depend on how early you chose to start claiming benefits.
Here are some guidelines concerning what full retirement age is for you:
- Born in 1942 or before. You’re eligible now to be receiving benefits.
- Born between 1943 and 1954. Your full retirement age is 66.
- Born between 1955 and 1959. The age steadily increases until it reaches age 67.
- Born in 1960 or later. Your full retirement age is 67.
Claiming benefits before you reach your full retirement age could subject you to a cap being placed on how much you can earn without it affecting the amount of your benefit.
If this happens, the amount of your benefits will be adjusted when you do reach full retirement age. This is to account for the deductions taken before you reached that age.
Your benefits will be adjusted each year to keep up with changes in the cost of living.
If you’re already receiving Social Security benefits, you’ll automatically be enrolled in Medicare Parts A and B, which are hospital and medical insurance respectively, when you turn 65. If you aren’t enrolled in Social Security, you’ll need to enroll in Medicare.
You will receive a card and necessary information in the mail before you turn 65.
Medicare Part A is typically no cost to you if you or your spouse have paid Medicare taxes during the years you worked. Part B, however, is optional and will require a monthly premium.
If you choose not to keep Part B coverage, follow the directions you receive when you get the cards and information in the mail to let Medicare know you don’t want it. You will need to return the card so that you aren’t charged a premium. Keep in mind that if you choose to add Part B at a later time, you may be charged a penalty.
Enrolling in Medicare can be confusing. Be sure to talk over your options with an expert to make wise financial and health decisions.
Let’s recap with a timeline.
- Age 50. You can start making catch-up contributions to your retirement savings plan. Check your Social Security statements to start getting an estimate of what your monthly benefit will be.
- Age 59 ½. You won’t receive a penalty for removing money from your retirement savings plan.
- Age 62. The earliest age you can collect Social Security benefits.
- Age 65. Sign up for Medicare.
- Age 70 ½. You’ll need to begin taking minimum withdrawals from your retirement savings account in order to avoid paying penalties.
Knowledge is power
To get the most of your benefits in the future, you need to start planning for retirement well in advance. When you have a handle on the process and you have the information you need, you can make the best decisions for your future.
If you have questions, you can contact a reputable private insurer who can help you through the process.
Get in touch with us today and we’ll put you on the right path to preparing for retirement.
How prepared are you for retirement?