When you feel well-prepared for retirement getting ready to stop work can be an exciting time. For those who have some catching up to do, the idea of not being employed may be more concerning. In a perfect world, people entering their 50’s and 60’s will have dutifully saved what they need to retire comfortably. However, for some, life circumstances may have taken precedence over retirement saving. Fortunately, there may still be time to plan for your retirement goals.
Downsizing
Individuals nearing retirement are often in a better position to cut expenses through downsizing. With the children grown and out of the house, now may be the perfect time to consider selling the family residence and finding something smaller and less expensive to maintain. If you have been in the home for years, it probably has equity which you can add to your retirement or put into an interest-bearing savings account. Plus, with a less expensive dwelling, you can contribute more of your income to your retirement and savings.
Catch-up Contributions
Potential retirees who are still part of the workforce can also take steps to shore up their retirement plans. For example, after turning 50 employees are allowed to contribute thousands more a year to their 401(k) accounts that they could before. Older workers can also increase their IRA contributions. When workers have several smaller 401(k) plans, they may also be able to combine them for a more substantial combined benefit.
Long-Term Care Planning
A vital part of preparing for retirement is thinking about how to pay for long-term care. This term refers to personal care services which can be provided in places such as your home, nursing homes and assisting living communities. These services can be expensive and are not typically covered by Medicare or regular health insurance policies. You can buy traditional long-term care insurance, but these plans can be costly. There are other “hybrid” policies, also called asset-based polices, which allow you to leverage current assets to help pay for long term care if it becomes necessary, but also provides a death benefit to your loved ones if you never need long-term care. With either type of long-term care insurance, you can only obtain coverage prior to needing the services. Those with pre-existing conditions, will probably not be able to get a plan for this care. Medicaid covers long-term care, and there are several ways to restructure assets and spend down assets to qualify. We have discussed many of these Medicaid planning and asset protection strategies in other blogs and in our Elder Care Whiteboard Videostm.
Social Security
As a working person who is paying into the social security system you have the expectation you will be able to draw this benefit once you retire. Deciding when to draw social security can significantly impact your retirement plan. While you can begin benefits as early as 62, this will mean having a permanently reduced payment amount. Waiting until your full retirement age or even longer will mean receiving a higher benefit. When to take payment will depend significantly on your circumstances. For instance, if your finances are limited, having social security sooner may make sense. On the other hand, if you have other resources, waiting until you can get a more significant benefit amount could be to your advantage.
Planning for retirement is a good idea at any age. Our office is knowledgeable about retirement planning options and can help you understand your choices and make informed decisions. Please contact us online or by phone if we may be of assistance.