If the coronavirus pandemic has pushed you to rethink your retirement plan, you are not alone.
According to a recent survey by TD Ameritrade, 37 percent of baby boomers and 39 percent of GenXers say they may need to work longer because of the economic impact of the COVID-19 crisis. But on the other side of the fence, many furloughed workers and older Americans with health concerns are considering an early retirement.
I don’t know why some experts have made “retiring on track” seem like heading into the abyss, but avoiding the issue altogether is pointless. (Especially during times like these.)
The answer is to mentally kick any unrealistic stereotypes you may have heard about to the curb and make the best choices for you.
Regardless of today’s economic backdrop, you’ll need to cross some important items off your to-do list before retiring at any age. But you might be more prepared than you think.
Here is a retirement ready checklist that can help you visualize how far you’ve come. If you haven’t already, be sure to speak with your financial adviser about these topics, especially if you are considering an early retirement.
Retirement Budget
Step one is to create a mock retirement budget. Understand what your income will be and how you can confidently spend the money you have accumulated for retirement.
Emergency Savings
Prepare for emergencies by saving at least 3 months of living expenses, and have that money easily available to you.
Tax Strategy
This is the most overlooked aspect of retirement planning – and one that can make a big difference. Have a sound tax strategy to guide you through the process of spending money from both taxable and tax-deferred accounts.
Health Insurance
Price it out, know your coverage areas. Many financial advisers offer tools that can help break this down for you.
Social Security
There is no one-size-fits-all plan for figuring out when is the right time to begin collecting Social Security benefits. You can start taking it as early as age 62, or wait until you’ve reached full retirement age.
It can pay to hold off, as early withdrawals are reduced by a certain percentage, but this should be weighed against other factors.
Here is an example. According to Investopedia, if your full retirement age is 66 and you begin claiming benefits at that age with a full monthly benefit of $2,000, you’ll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, your benefit will be reduced to 75 percent of your full monthly benefit. (i.e. you’ll get 25 percent less per month, and your check will be $1,500)
401(k) Strategy
Have a strategy for your 401(k) plan and determine the best time for you to access the money, based on your goals.
Lifestyle & Location
Consider where you’ll live, both short-and long-term. Have a plan for funding a move and understand the timing involved.
Bucket List: (VERY IMPORTANT)
Write down your personal goals for your retirement years. Explore your dreams, priorities and values. Do you want to explore some volunteer roles? Rent an RV or a boat?
What will you do with your time? Setting aside time to come up with this list is key to living the retirement of your dreams.
