Are you getting ready to retire? Stocking up on F Dollars or Cotton?
Or maybe you have a few more years to go yet but are concerned about how you’ll adjust to life after retirement. While looking forward to relaxing, traveling and getting some projects wrapped up around the house is what everyone looks forward to, there may be some unexpected changes that you didn’t expect, such as changes in your insurance and taxes just to name a few. Here are a few things to consider ahead of time, so there are no surprises down the road.
Needing Emergency Funds
An unforeseen emergency, accident or an adult child needing funds right away are common problems many retirees face. If you need to grab some cash, there are a few ways to do it. You can take money out of your savings account without penalty, but you’ll need to find ways to replenish it as well. You can refinance your home or take out a second mortgage, but make sure you get an excellent rate so you can pay it off quickly. Avoid things like obtaining a reverse mortgage, which gives you fast cash but then the bank will own your home. This is not a positive solution for a short-term problem. If you’re having problems with your estate or taxes on your home, consult with a reputable tax attorney right away.
Once you reach 60, you won’t have to pay a tax penalty on most IRAs. This is a good thing and allows you to use that money toward your retirement expenses and other investments you wish to acquire. The only thing you’ll have to be careful of is any withdrawal has to be claimed as income; therefore it may place you in a much higher tax bracket at the end of the year. Also keep in mind that at age 70.5, it’s recommended that you make the minimum distributions from your 401k or IRA or you will face a hefty tax penalty that is equal to half of what you should have taken out from the plan. Now is the best time to consult with your financial advisor so he can come up with a precise plan to ensure that you are getting the most cash in your pocket, penalty and fee free.
Not Having Enough Life Insurance
Not everyone likes to think about final expenses. It’s something that every working adult should be putting their money into as early on as possible. But even after paying into a decent life insurance policy, you may have just checked it only to realize there is not nearly enough to cover all of your assets. In addition, there may not be enough to leave all of your children or grandchildren a decent inheritance. Calling your insurance agent to go over more coverage is a good thing to do now rather than later. Because you already have a policy in effect, it’s easier to make changes. If there is no way to add to the policy, you may have to supplement it or add another policy that will coincide with it. Depending on your payment history and the amount of coverage you currently have, it should be easy to qualify for an additional payout. The only drawback is depending on the terms of the policy, you may have to submit to a physical exam and because of your age, you may be penalized.
Getting the Most out of Your Health Care
Turning 65 and also getting ready to retire means you’ll have more time to do the things you couldn’t do all the years you were working. But if your health is not in the best of shape, you won’t be doing any extracurricular activities or traveling. So taking care of yourself should be a high priority. If you’ve found that your health care costs more than your monthly premiums, it’s time to shop for some supplemental health insurance. Your first contact should be Medicare (during open enrollment) to sign up for a new plan that fits within your budget. From there, be sure to get on a prescription plan that will help curb the costs of high price medications. Also, you may be able to contact the manufacturer of your medication, they might be able to offer some of your medications to you at no or low cost. Think about adding a private insurance carrier as a secondary insurance. This may curb some of the costs that your primary insurance doesn’t cover.
There are many ways that you can make your retirement a positive one. Avoiding the pitfalls of bad financial choices is the first step toward a happy and successful retirement.