Retirement is a life changing event, but being adequately prepared will make the transition an easier one. If you are about to retire and don’t have a plan, please consider making one now.  Here are some issues you will be facing as you move into retirement.

Retirement Budget

Make a list of all future cost:
Essential expenses – housing, insurance, taxes, medical and food.
Flexible expenses – gift, clothing, and the occasional big expense like a car or house repair.
Discretionary expenses – entertainment and travel.
After this is done, you will see whether your guaranteed income will cover the basics. If you find that you will need to start using retirement savings from the outset, you may consider delaying retirement or getting a part-time job to cover the essentials. This will help you in two ways – you can delay taking Social Security and continue to save for retirement.

Portfolio Review

Your number one goal is to preserve the savings you accumulated. Now is a good time to review your portfolio and see if you’re comfortable with its risk level or if it needs to grow more conservatively over the next several years.

Medicare

You have three months before and three months after your 65th birthday to sign up for Medicare, do not miss this window. If you don’t sign up, and you don’t have coverage through your employer, you may pay a 10% perpetual penalty on premiums when you do sign up.
Part A — covers hospitalization and is premium-free. Unless you wish to continue contributing to a health savings account, you will need to wait to sign up when you retire. To enroll, go to ssa.gov.
Part B — covers outpatient care and doctors’ visits.
For Singles with adjusted gross income of $85,000 or less – 12l.80/mo.
For Couples with adjusted gross income of $170, 00 or less – 121.80/mo. month
If you are above these income levels, the cost will range – $170.50 to $389.80 per month
There is also a surcharge of $12.70 – $72.90 a month for the premium for Part D prescription drug coverage.
Please note: Employees of larger companies may choose to keep their group coverage while still working; you will have eight months after you leave to enroll for coverage. Employees of businesses with less than 20 employees, will use their group coverage as a secondary plan to Medicare at age 65. Sign Up for both Part A and Part B. For details, go to Medicare.gov.

 Social Security

Age 62 — you are eligible, but your benefits will be reduced which means you’ll receive 20 to 30 percent less each month than if you wait until you reach full retirement age.
Age 66 — full retirement age for those born between 1943 and 1954.  If you were born between 1955 and 1960, benefits increase annually from 66 and two months to 67.
Age 67 — full retirement age for those born in 1961 or later.
Age 70 — this is the last year to benefit from the 8% yearly boost due to the postponement. You should begin collecting your Social Security benefits.
For more information go to www.ssa.gov.

Fund Distribution Plan

Create a plan for how you will disperse your retirement savings; once you have retired. Some Strategies to Consider:
4% Rule — withdraw 4% in the first year and the same dollar amount, adjusted for inflation each following year.  This strategy provides some assurance that your money will last 30 years or so, based on historical returns. However, if the market is in a downward spiral or experiencing a bear market following this rule could be more harmful than helpful.
4% Rule — without inflation adjustment – this practice is largely based on the market outcome each year, making your payouts vary from year to year.
Bucket Strategy — the idea is to set aside one to two years’ worth of living expenditures in cash bucket number one while holding more risky investments with higher potential returns for the later years of retirement in the other buckets.  The idea behind the bucket strategy is to avoid having to sell investments in a down market to fund living expenses.

Consider your Pension Choices Carefully

Lump sum — gives you the freedom to invest the money yourself and possibly wind up with more than you would have received from your pension over your lifetime. Also, the remains in the account will benefit your heirs. The downside would be if the market performs badly or you live longer than expected.
Guaranteed Lifetime Payments — this option provides security knowing the payments will last as long as you do.
Married Couples need to consider whether to take the single-life option or the joint-life option, which has lower payouts due to the extended amount of time the pension will be paid out before the surviving spouse dies.
Planning for retirement can be complicated, do your homework and talk to your financial advisors. Having a comprehensive and holistic financial plan will give you confidence and peace of mind as you head into your retirement years.
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