In light of the pandemic and recession, your retirement in 2021 may seem more complicated than when you chose your retirement date all those years ago. But you can retire comfortably this year, if you assume you’ve put together a good financial plan that you can see through several decades.
However, you can never be too careful with retirement planning; so you need to do the following three things before offering your resignation to make sure you are financially ready.
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1. Go through your retirement plan one more time
Review your retirement plan and verify that you have saved enough. Your retirement goals may have changed during your working years, your investments may not have performed as well as you hoped, or at some point you may not have saved as much as you wanted. These things can mean that you are not ready to retire yet, even if you are ready to quit work. It is better to know in advance so that you can make adjustments, rather than trying to deal with the consequences later in your retirement.
Your retirement plan should include a rough estimate of how much you will spend each year. Make sure you are still happy with this amount. If you have spent a lot more on it over the last few years, it may indicate that you need a little more each year than you thought.
Consider how you plan to spend your retirement. Your expenses may drop, but some people, especially those who plan to travel a lot, may spend at least in the early years of their retirement about the same or maybe even a little more than they were used to. Expenditure usually decreases as we get older and life slows down unless you have large medical expenses.
If you are worried about not having enough money, you should delay retirement by a few months or years until you have saved enough. You can also try to contribute extra each month to your planned retirement date if you just take a little off. Individuals under the age of 50 can contribute up to $ 19,500 to a 401 (k) and $ 6,000 to an IRA in 2021, while someone over the age of 50 can contribute up to $ 26,000 and $ 7,000, respectively.
2. Think before you start with social security
You need to have a plan for social security, and now is the time to consider all your options. The age at which you start has a significant influence on the amount you will receive during your lifetime.
You must wait until your full retirement age (FRA) to receive the full benefit to which you are entitled on the basis of your employment record. It’s 66 or 67 for today’s workers, depending on the year of birth. You can start as early as 62, but you will only get 70% of your scheduled benefit by check if you are FRA 67, or 75% if it is 66.
You can also delay benefits to your FRA, and your checks will gradually increase to 70, when you get 124% of your scheduled benefit if your FRA is 67, or 132% if it’s 66.
Postponing benefits until you are FRA or taller is usually the smartest game if you are expecting in the mid 80s or longer.
If you are the only way to claim retirement this year that you have social security and you are comfortable minimizing your lifetime benefits, it may be worthwhile to start social security once you retire. If not, you may want to keep working until you have saved enough for a few years without your social security to cover your expenses. Then you can defer the benefits until you are eligible for larger checks.
3. Plan a debt plan
It’s hard to predict how much debt you’ll carry in retirement if you’ve been away for decades. This is especially true with high-interest loans, such as credit card debt.
Since you are close to your pension, it’s a little easier to find out. It is not impossible to retire with debt, but it can be risky. If you have a mortgage and are left behind on your payments, you could lose your home. Credit card debt getting out of control can end up costing you more than you expected and draining your savings faster.
Before you retire, you should take out your debt and plan to get rid of it. Strive to pay off high interest debt, where possible. You can use a credit card with balance transfer to temporarily grow your balance or take out a personal loan so that you have a predictable payment that is easier to manage with your retirement.
You can use your retirement savings to pay off your debts, but you will have less money to see you through your retirement. Try to avoid using your retirement savings for debt repayment if you can. Use any extra money you have or work a little longer to pay off your debt before you retire.
You are about to move on to a steady income with life, and there is potential that it could go very wrong if you did not plan properly. If you are not confident in your ability to retire comfortably at the moment, go back to the drawing board and play with a few different scenarios to find out how much longer you need to work and how much you need to save to get the money what you need.