Planning for retirement can be stressful. In fact, according to a Gallup poll, having enough money for retirement is the biggest concern for Americans and has been since 2001. In the most recent version of the study, 64 percent of Americans said they were concerned about not having enough money for retirement.1
Much of this concern comes from uncertainty. Without a plan in place, you may not be sure whether you’re on track to retire comfortably. It’s important to develop a strategy for your retirement. This is especially true if you are in the final years of your career and facing life without a paycheck.
While saving is an important component of any retirement strategy, it’s not the only factor. As you wind down your career, there are a number of other decisions and issues you may face. Below are three planning steps you should consider if you are just about to enter retirement:
Debt can always be challenging in retirement, but not all debt is created equal. Some debt is tied to assets and can be paid in part or in full by selling those assets. A mortgage is a great example. Other debt, however, is unsecured and may have high interest rates. This kind of debt, like credit card balances, can be especially damaging after you stop working.
Because you no longer have a steady source of income from paychecks, every dollar you have should be put to good use. Your retirement can last for decades, and while things like Social Security and pensions can help, chances are you will have to fund expenses with other assets. If you have to use your investment income to service high-interest debt, that’s less money available to fund your lifestyle.
As you enter the final years of retirement, now may be the time to finally tackle your credit card debt. Scale back on your lifestyle, and possibly even pick up a second job. If you can eliminate this debt before you retire, you’ll have a better chance of living a comfortable and enjoyable lifestyle.
Health Care Needs
As you near retirement, you may want to think about how you will pay for any health care costs you may encounter. Medicare is a good option for some retirees. After all, you’ve been paying into the system for years, and now is your opportunity to switch from a contributor to a recipient.
There are a couple of different ways to approach Medicare, though. For instance, while all recipients receive coverage for hospitalizations and doctor’s office visits, there are additional options that give you more coverage. For example, you could look into Medicare Advantage policies that also cover things such as vision and dental.
Also, consider that some costs aren’t covered by Medicare. You may have to pay out of pocket for things like copays, deductibles, premiums and more. In fact, Fidelity estimates that the average 65-year-old couple will pay more than $260,000 out of pocket on health care in retirement.2 Think about how you may pay for these costs.
You may not think you’ll need long-term care, but the fact remains that, according to the U.S. Department of Health and Human Services, 70 percent of retirees will need long-term care at some point.3 And the cost of long-term care can be very expensive. What’s more, your Medicare benefits do not cover the costs associated with long-term care.
It’s possible to pay out of pocket for these expenses, but doing so can adversely affect your savings. It might be a good idea to incorporate long-term care insurance into your retirement planning. Most long-term care insurance requires underwriting, so you might want to consider the option while you are still healthy.
Ready to make your final planning decisions before you retire? Let’s talk about it. Contact us at Foote Financial Group for more information. We welcome the chance to help you analyze any remaining questions and develop a strategy. Let’s start the conversation today.
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