You’ve probably paid Medicare taxes your entire career. After you retire, you’ll enjoy the benefits that come from all those payments. Generally, Medicare is available starting at your 65th birthday, although some forms of coverage may be started later.
In its original form, Medicare only covered hospitalizations. Over the years, other forms of protection have been added. Today, Medicare offers a robust menu of options and choices, each of which covers different services and comes with varying premiums, deductibles and copays.
You may find the menu of Medicare options confusing and possibly overwhelming. However, it’s important to review your choices and find the best fit for your needs. By choosing the right protection package, you can minimize the impact health care has on your retirement assets.
For nearly nine years, investors have enjoyed one of the longest bull markets in history. However, recent volatility suggests the possibility that the almost decade-long market upswing could soon come to an end.
Volatility is a constant presence in any financial market. For retirees, that volatility can present a difficult challenge. You may rely on your savings and investments for income. If the market suffers a sharp downturn, you may have less income available to pay your bills and support your lifestyle.
There’s no way to predict the future movement in the market. However, you can take steps to protect your assets and limit your risk exposure. If you’re approaching retirement and haven’t yet analyzed your investment strategy, now may be the time to do so. Below are a few tips to help you get started:
Retiring soon? If so, you may be wrestling with the decision of when to file for Social Security. It’s permanent, so it’s a big decision. Once you start receiving benefits, you can’t change your mind.
The timing of your filing also plays a big role in your benefit amount. If you file early, you’ll see your benefits reduced. On the other hand, you could delay your filing, which would lead to an increase in your benefit amount.
You can file as early as age 62. However, your benefit is permanently reduced if you file at any point before your full retirement age (FRA). Most people reach their FRA between their 66th and 67th birthdays.1
You don’t have to file at your FRA, though. In fact, you can delay your filing as late as age 70. For each year you wait past your FRA, your benefit amount increases 8 percent. Conversely, your amount could be reduced as much as 25 percent if you file before your FRA.1
One of the biggest expenses you could face in retirement may not even be on your radar. It’s not health care, taxes or even food costs. It’s inflation.
Inflation is the incremental increase in the price of goods and services from year to year. It’s a natural part of the economy. As the economy expands—and wages and earnings increase—so, too, do prices. The inflation rate fluctuates, but there is rarely a year in which prices don’t increase at all.
While modest levels of inflation can be a sign of a healthy economy, they can also be dangerous for retirees. Consider the long-term impact of even a modest inflation rate. An average annual inflation rate of 3 percent would double your cost of living over a 24-year retirement.
Social Security increases benefits annually through a cost-of-living adjustment (COLA). However, this adjustment may not be sufficient for retirees. For example, in 2017 and 2018, COLA was set to 2 percent. In 2016 it was 0.3 percent, and in 2015 there was no COLA.1
Consider working part time in retirement? That could be a wise decision. Granted, the main point of retirement is to stop working, so the idea of part-time work may not be appealing. However, there are some key benefits to picking up side work after you retire.
Obviously, the extra income is a primary benefit. If you’re like many retirees, you’ll receive income from Social Security and possibly a pension. However, you also may need to take withdrawals from your retirement savings. Those savings may be vulnerable to market volatility, which could impact your income. Part-time work can help you minimize that risk.
Is retirement right around the corner? If so, you may be in the process of finalizing your strategy. Perhaps you are considering when to actually leave the working world or when to file for Social Security benefits. You might be finalizing your investment strategy or thinking about downsizing to a more affordable home.
The final years before retirement are often your last opportunity to take action to solidify your financial future, so it’s important to consider every possible risk. One risk you definitely shouldn’t ignore is the threat posed by sizable out-of-pocket health care costs in retirement.
It’s a new year again. For many, that means it’s once again time to assess life and identify areas for improvement. Of course, this period of reflection usually results in a list of resolutions or goals. Many people resolve to eat healthier or exercise more frequently. Others may focus on their education or career development. Some people may use this time to look at their house and plan out various home improvement projects for the coming year.
Financial goals are also a popular choice for New Year’s resolutions. The beginning of the year is the perfect time to analyze your financial situation and develop a list of action items. A regular annual financial checkup can help you stay on top of potential risks and on track to meet your biggest financial goals.
Feeling pressure to save more for retirement? You’re not alone. According to a study from Gallup, more than half of Americans are worried that they won’t have enough money to fund their retirement. In fact, Gallup has conducted a study on Americans’ top financial worries every year since 2000, and retirement has always been cited as the top concern.1
According to a separate study from the Economic Policy Institute, there’s good reason for the widespread concern about retirement. The study found that half of Americans have no retirement savings. The average savings balance is just over $95,000, but the median balance is only $5,000.2
Are you starting to think about your legacy and how you’ll pass it on to the next generation? It’s never fun to think about your own death. However, it’s too important to ignore. You may have a substantial amount of assets that you want to distribute to loved ones. You may have a spouse, children or other family members who are dependent on you for support. You might even own a business that could face hardship after your death.
All these issues require some level of estate planning. If you fail to develop a robust estate plan, you could leave your loved ones, business partners and others in a difficult financial situation.
Are you thinking about retiring early? Maybe you’ve accumulated enough savings to retire in your 50s. Or maybe you’re facing a health issue or job loss that’s pushing you into retirement. No matter the reason, early retirement can present a number of unique challenges.
One of the biggest issues that early retirees face is taking distributions from their qualified retirement accounts, such as IRAs and 401(k) plans. These accounts are tax-deferred, which means there are no taxes on growth as long as the funds stay inside the account. However, distributions may be taxed as income. Additionally, if you withdraw funds from a 401(k) or an IRA before age 59½, you could face a 10 percent early distribution penalty.