After decades of work and diligently saving for retirement, you may be thinking that 2024 is the year to finally retire! However, before you officially retire, make sure you take the time to assess your situation and your retirement plan. Taking the time to do this, ensures that you’re in the best possible position when you retire to total retirement success. How do you assess your retirement readiness? REAP Financial is here to help you identify some key things you should be considering!
Consider Your Healthcare Situation
If you’re still working, you may still be taking advantage of your employer’s healthcare. However, once you retire, you’ll need to think about where you’ll get your healthcare. If you’re retiring early and not yet 65 years old, you won’t yet be eligible for Medicare. If this is your case, you’ll need to look at other options for your healthcare plan. You need to make sure you’re planning for this expense, as it can get up to $700-$800 a month, per person.
If you are over 65, you will qualify for Medicare immediately, so you can decide which Medicare Plan best fits you. Even if you do qualify for Medicare, you still need to consider if you want a supplemental plan or Medicare Advantage on top of that. In any case, you’ll still need to budget for how much Medicare will cost you. It can be higher than you might expect, since the income you’re making right now can dictate the amount you’ll have to pay in Medicare premiums. We’ve seen prices range from $300 a month to $600 a month for the same coverage. Remember, your Medicare payments will be dictated by your income, so high income will lead to a higher premium.
Social Security
When you’re considering your Social Security benefits, don’t forget to consider taxes! The majority of Americans pay taxes on their Social Security benefits. If this is your case, up to 85% of your benefit will be taxed. When assessing your retirement readiness, you need to make sure you’re looking at the gross number (post-tax), not the net number! This will let you know how much money you can expect from your Social Security after tax and the Medicare premiums are removed. Make sure you have a good idea of how much you can expect your net Social Security income to be, since the gross number on the statement can be misleading.
Make a Budget
Budgeting isn’t the most fun aspect of retirement, since most people retiring will be coming out of some of their highest earning years, when you likely didn’t need to follow a budget. However, when you retire, your income will be more limited than you’re probably used to. The most important numbers in your retirement plan are the ones in your budget! You’ll want to make sure you have your budget planned out, since small margins can have a drastic impact on your financial plan.
Location
Consider where you will live in retirement. If you decide to move to a different state, make sure you look at whether or not that state has income tax. If they do, it can take a significant toll on your retirement portfolio. If you didn’t plan for this income tax during your retirement plan and then have to pay it, you may see significant swings in the net worth of your retirement holdings, which could be up to $150,000 – $300,000 less over 30 years of retirement. So, if you’re considering a move in retirement, make sure you take this into consideration and assess whether you can afford to move or not.
Plan it Out with a Trusted Advisor
At REAP Financial, we help successful families transition confidently into retirement every week. We help them create written plans, which are updated every year, to guide them on when to take Social Security, how to maximize those benefits, what their future tax liabilities will be, what their Medicare premiums will be and so on. This knowledge helps families spend confidently and enjoy their wealth during retirement. This confidence is why it is so important to work with a fiduciary advisor, who specializes in retirement.
If you’re looking for more ways to prepare yourself and your family for retirement, REAP Financial is here to help! Our free guide, “Your Retirement Income Planning Checklist,” can help you dive deeper into your pre-retirement assessment in 2024. Email us at retire@reapfinancial.com to get your free resource sent straight to you!
