When a client comes to me for a retirement plan, I ask him/her “When would you like to retire?” Many times the answer is “yesterday.”
After we chuckle, we must to get into reality and figure out what is possible. There are a few guidelines that answer the questions as to how much do you need when you retire, but there may be some factors telling you not to retire. What are these factors? Here are just a few:
Social Security eligibility. Just because you have reached the magical ages of 62 or 65 doesn’t mean you should automatically retire and begin Social Security. If you start on Social Security before your “full retirement age” (FRA), your benefit will be permanently reduced. The full retirement age for people born between 1943 and 1954 is 66 years old. The FRA for people born between 1955 and 1959 is between the 66th and 67th birthdays. Those born 1960 or later the FRA is age 67. If you begin collecting Social Security before your Full Retirement Age, then you are limited how much earned income you can make in a calendar year; too much and your Social Security benefits will be reduced. However, for every year you delay your Social Security benefit after your FRA, your benefits increase by 8 percent per year until you are 70.
Part-time work. If you retire and still feel like you have to work a part-time job to make ends meet, then you are probably retiring too early. Your part-time job will probably not pay as well as your full-time job. So, you may want to stay and save a few more years in your current job.
Medical costs. The high cost of medical expenses could be one of your biggest expenses during retirement. You want to make sure you are properly insured based on your financial situation. You should know what your health insurance premiums are, as well as what long-term care insurance premiums will be.
Debt and financial obligations. If you want to retire and you still have a lot of debt, consider working a few more years. Also, supporting adult children or aging parents may also keep you in the workforce longer than you want.
A few years before you retiring, consider a retirement plan. The plan will give you glimpse of your retirement future, based on a few assumptions. This exercise will ensure that you are on the right track when it comes to spending and investing during your retirement years. My best as you approach retirement is “to have a plan, and then work that plan.”
ICA does not provide tax or legal advice. Investment Centers of America, Inc. (ICA), member FINRA/SIPC and a Registered Investment Advisor is not affiliated with Home State Bank. Securities, advisory services and insurance products offered through ICA and affiliated insurance agencies are *not insured by the FDIC or any other Federal Government agency *not a deposit or other obligation of, or guaranteed by any bank or their affiliates *subject to risks including the possible loss of principal amount invested.
Information provided by Timothy J. Heisterkamp, CFP®, Investment Centers of America, 115 W. State St. Jefferson; 515-515-386-2570.