The coronavirus pandemic and the accompanying economic crisis have made many people rethink their retirement plans. In a recent survey by the TD Ameritrade, about 39% of GenXers and 37% of Baby Boomers say they may have to work for a few more years than planned due to the coronavirus’s negative impact on their IRA and 401(k) accounts. On the other side, there are laid-off and older people considering early retirement due to health concerns.
While the experts have made “retiring on track” a big topic, it seems like most plans have gone into the abyss. However, setting aside your retirement entirely altogether may not be the best option.
While there’s so much to do before you retire, you may be more prepared for retirement than you think. If you haven’t done so already, it’s essential to speak to a financial advisor about your retirement plan and preparedness.
Here’s a checklist to gauge how far you have come and how much more you have to prepare for retirement.
You should have between three to six months of living expenses saved up to your emergency fund. This money should be readily available to you when you need it for whatever expenses you might have.
Like your regular monthly budget, there’s a need to create a mock retirement budget to understand your income and how you can spend money in retirement.
Most people often forget the tax aspect of a retirement withdrawal, and they are often surprised when it surfaces. A sound tax strategy guides you through spending money from your IRA and 401(k) retirement accounts – whether taxable or tax-deferred.
Many face health challenges as they age, and these medical costs are often expensive. Find out the cost of suitable health insurance and include it in your retirement plan.
You can start withdrawing from your Social Security as early as the age of 62. However, leaving your Social Security benefits for a lot longer would mean earning more.
For instance, if you wait until you are 66 to start withdrawing from Social Security, you will enjoy the full benefit of $2,000 per month. However, if you begin withdrawing at age 62, which is four years earlier, your benefits will be reduced by 25%. So you’ll earn $1,500 – $500 less than the original amount – when you withdraw earlier.
Despite this, there are several other factors you have to weigh before concluding as to the best time to start withdrawing from Social Security. This includes how much cash you’ll have available after retirement.
There’s also a need to outline the best possible strategy for your 401(k) based on your goals and need for money. Your 401(k) retirement plan will help you determine the best time to access the money, based on your goals.
Lifestyle & Location
It helps if you consider where you live or intend to live. It’s essential to have a plan on how to fund a move if necessary.
Write down your goals for retirement. What do you intend to achieve in those years? Explore your dreams and values. Do you have specific places you want to see? Do you want to rent a boat and enjoy the wave? You’ll have a lot of time on your hands during retirement. Plan what you’ll do with that time.
But for now, set aside some time and come up with a list of key living arrangements to ensure you have the retirement you dream of.