If your goal is to live among palm trees and sandy beaches a year from now, I have ahomework assignment for you. I would recommend gathering information on your currentfinancial situation such as spending, housing, debt, savings, investments and health careneeds over the next few months.
Spending-wise, it’s a great exercise to go through your credit card charges and checkbook tolook for recurring costs and bills that may be lower in retirement. For example, you no longermay have major wear and tear on your automobile if you have been commuting longdistances for work. In addition, your car insurance costs may decrease as your mileagesubsides. Be sure to include your significant other in this review process as this exercisemay help to rein in a loved one who is a chronic free-spender!
In regard to housing, will your costs remain the same or will they decrease due to downsizingor moving? If heading to a warmer climate, estimate whether your Northeast heating bills willbe offset by the air-conditioner that runs around the clock down in the sunbelt. New locationspecific expenses may pop up, such as the exterminator that visits regularly. To get a handleon things, I would make it a point to ask your friends about their experiences and costs ofliving in the areas in which you’re interested. In the very least, you usually can find blogs orforums offering opinions and cost of living for most areas in the country.
Debt threat: It’s not ideal to enter retirement with a lot of debt. Having the burden of ongoingpayments can become especially uncomfortable during downturns in the stock market. Whenit comes to taking on a mortgage or other debt in retirement, be sure to have your financialprofessional or CPA in the loop before taking on new debt.
Get to know Medicare! One of the mysteries of retirement planning is learning aboutMedicare supplements and how these coverages work. Supplements pay some of out-of pocket costs that Medicare Part A and B don’t cover, such as deductibles and coinsurance. You will have a wide array of choices available. Medicare supplements are portable if you areout of state and coverage benefits are standardized among providers. The biggest challengewill be sorting through the coverages to find one that best suits your personal needs. Forexample, you will need to decide whether to purchase an optional Medicare Part Dprescription drug plan. This coverage offers more complete prescription coverage than thebasic coverage that Medicare offers.
With one year or less to go before your retirement, financial planning is your friend. Be sureto run realistic projections that include after-tax returns on investments along with SocialSecurity, pension and any part-time work income you may receive. Don’t forget to includeinflation adjustments and the possibility of a long-term care stay. Ideally, you will have yourcertified financial planner or CPA run the numbers along with your input!
Finally, be sure to review and reposition investment assets in the context of your financialplan since savings and investments are a crucial part of every retirement income strategy.Once you complete your homework, we hope your newfound clarity allows you to relax whenenjoying your next stage of life in retirement!
For podcast fans, please tune in to our fun financial podcast “unfettered wealth” from yourfavorite source. You can also pull up our podcasts on YouTube. Enjoy!