Choosing when and how you want to retire is a privilege not everyone experiences. If you do have the choice and you’re ready for this next phase of your journey, you’ll need to make some major decisions and be prepared for a few paradigm shifts in your daily routine. To help you financially and emotionally prepare for a happy and successful retirement, let’s run through a checklist of items to address prior to retiring.
What’s next? – Long before you announce your retirement, consider why you’ve chosen now to retire and what you’re going to do with your time. You will still need purpose, meaning, and social connections. Whether you’ll be checking off items on your bucket list, volunteering or spending more time with friends and family, be sure you know what you are retiring to, not just what you’re retiring from.
Employer benefits – What benefits will be available to you once you retire? If you have a pension, do you have the option to take it as a lump sum or receive monthly payments? Is it a defined benefit or a defined contribution pension? Will you have access to a health reimbursement account?
401(k) or 403(b) options – There are certain instances where you may want to leave your 401(k) or 403(b) with your employer after you retire, but more often, it is beneficial to roll the plan into an IRA which can provide more flexibility, a wider range of investment options and lower fees. Every employer plan has their own set of rollover requirements – it’s best to review all your options ahead of time.
Social Security - When and how you claim benefits will significantly impact your overall financial plan for retirement. In general, delaying your SS income until age 70 will increase your monthly benefit, however, everyone’s circumstances are different. It’s so important to speak with a professional who is well-versed in this area to help you understand the full range of SS benefits you’re entitled to receive.
Health Insurance / Medicare – Before you turn 65, have a clear picture of what health insurance options will be available to you. Make a list of the doctors, services, and prescriptions you will need, and confirm whether you will continue to have coverage from your former employer. Remember, enrolling in Medicare starting at age 65 will help avoid penalties for signing up late!
Financial Plan – Revisit your financial plan before you pull the trigger on retirement. You will want to review your annual income and expense projections to determine if your guaranteed income (pension, SS, annuities) will be enough. Make sure your investments and other savings will cover any shortfalls or unexpected major expenses. Review your investment strategy to ensure your portfolio is still aligned with your financial goals and that it is designed to weather periods of market volatility and inflation.
Retirement can be one of the most magical times of your life if you are financially and emotionally prepared. Take time to discuss the above items with a financial professional, your family, or anyone who may be impacted by your decisions. For more information on retirement planning, please contact us at 609-216-7440 or visit our website at www.knoxgrovefinancial.com
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