With only a few weeks left before we enter into a new year, it is never too early to start planning and thinking about your 2021 financial goals. This week let’s look at your life after employment and ask the question, are you ready for retirement? Here are some factors to consider.
Retiring debt free is ideal and will allow you all kinds of flexibility in your retirement years. Self-evaluation is critical here. The most important question you need to ask yourself is, are you comfortable retiring with debt? Undoubtedly, the kind of debt you retire with makes a difference. The cost and interest rates are significant factors. With today’s historic low mortgage interest rates, retiring with debt may not be a problem. On the other hand, retiring with high interest rate credit cards would be serious issue.
Do you have a financial plan?
I mean do you really have a financial plan? Have you considered questions such as when should I start drawing social security benefits? That’s a big question since it may come with tax implications. It also raises the question of, how many more years do you need to work in order to maximize your benefits?
While focusing on the number you need to retire is necessary, consideration must be given to whether that number will satisfy your spending needs. What about your retirement saving? Does the growth generated exceed the inflation rate in your retirement account? Do you have an emergency fund within your retirement plan?
What plans do you have for your health care in retirement? It is near impossible to forecast future rising health care costs over your lifetime. So you can begin planning by knowing that at age 65 you are eligible for Medicare benefits. Medicare has two parts: Part A and Part B and each part covers different services. What about long term care should it arise? Will you pay out of pocket or will you purchase a long term care insurance policy? This is a retirement cost you can never have too much saved in order to cover.
While we have focused on financial issues, the question of how will you spend your time cannot be ignored. Once you retire you’ll have approximately eight to ten hours of free time each day. How you spend that time is predictive of your retirement spending. Will you take a part-time job or will you spend time with family, picking up new hobbies, taking classes or volunteering?
You don’t need to wait until December 31, 2020 to start making your financial new years’ resolutions. Your 2021 financial forward thinking, begins now!