Ready to Retire? Know Your Options Before You Decide
You’ve decided you’re ready to retire. Then the questions start.
What will you do for health insurance before Medicare? Where will your income come from when the paycheck stops? Do you still need the life insurance you’ve carried for years? What happens if you or your spouse eventually needs long-term care?
It can be easy to look at one of those questions and think, Maybe I’m not ready after all.
But a question doesn’t have to be a roadblock. Sometimes it simply means you need more information. Retirement planning is about understanding your options and making decisions that support the life you want to live.
Healthcare: Don’t Assume You Have to Work Until 65
For someone hoping to retire before Medicare eligibility, healthcare can be one of the biggest concerns. But “I need health insurance” doesn’t necessarily mean “I have to keep my full-time job.”
Start by finding out what options actually exist.
Does your employer offer retiree health benefits? Could COBRA provide temporary coverage? Could you join a spouse’s plan? What would coverage through the Health Insurance Marketplace look like? Could part-time work with benefits fit into the life you’re envisioning?
You may even find possibilities you hadn’t considered. Some people seek out part-time work specifically because it provides access to health benefits, while also offering additional income, social connection or a sense of purpose. Companies such as Costco, REI and Target offer health benefits to eligible part-time employees.
These aren’t solutions for everyone. They’re examples of why it pays to investigate before deciding something isn’t possible.
If you retire before 65 and lose job-based health coverage, you may qualify for a Special Enrollment Period through the Health Insurance Marketplace. Marketplace savings can also be affected by household income, so healthcare decisions should be considered alongside the rest of your retirement finances.
What can you do now? Talk with your employer. Get actual COBRA costs. Explore Marketplace coverage. Ask about retiree benefits and a spouse’s coverage. If part-time work interests you, investigate employers that offer benefits.
Don’t make a major life decision based on what you think your options are.
Your Paycheck Is Ending. Your Cash Flow Isn’t.
Retirement changes where your money comes from, but your expenses don’t disappear.
Before your last paycheck arrives, ask: Where will next month’s money come from?
It may be Social Security, a pension, retirement accounts, investments, cash reserves, part-time work or a combination of several sources.
Then look beyond the first month. If you delay Social Security, what supports you in the meantime? If you want to travel more during your first few years of retirement, have you planned for that? Could withdrawals from certain accounts affect your taxes or other parts of your plan?
Someone planning several years of travel may need a very different cash flow strategy from someone who wants to stay close to home, work part time and help with grandchildren.
The goal isn’t simply building a retirement account. It’s figuring out how to use the resources you’ve built to support the life you want.
Does Your Insurance Still Fit?
You may have purchased life insurance years ago to protect your family if your paycheck disappeared. As retirement approaches, ask what that policy is protecting today.
If one spouse dies, would pension or Social Security income change? Would the surviving spouse have enough resources? Are there debts, family members or legacy goals you still want to protect?
The answer may be different at 62 than it was at 42. The point isn’t automatically keeping or dropping coverage. It’s making sure the coverage you have still serves a purpose.
The same kind of thinking applies to long-term care. Instead of starting with “Should we buy long-term care insurance?”, ask:
If one of us needed care, what would we want that care to look like, and how would we pay for it?
Insurance may be part of the answer. Using your own resources may be another. What matters is exploring the possibilities while you still have choices.
Could Someone Else Step In?
If something happened tomorrow, would your spouse, adult child or another trusted person know where to start?
They don’t need every password, but someone should know what financial accounts and insurance policies exist, where important documents are located and how to contact the professionals you rely on.
This is also a good time to review beneficiaries, powers of attorney, healthcare directives and estate documents to make sure they still reflect your wishes.
Being organized isn’t about having tidy files. It’s about making a difficult situation a little easier for someone you love.
Start With Your Life. Then Build the Plan.
There isn’t one right way to retire.
For one person, the right decision may be working another year. For someone else, it might mean leaving a demanding career earlier and finding part-time work that provides healthcare, social connection and extra income. Someone else may want to travel, volunteer or spend more time with family.
That’s why the question isn’t simply “Can I afford to retire?”
It’s also “What do I want my life to look like, and what choices can I make now to move in that direction?”
Sometimes the answer will be financial. Sometimes it will involve healthcare, work, family or insurance. Often, one decision will affect several others.
AUTHOR: Alexander Financial Planning, Inc.
This material is distributed by Alexander Financial Planning, Inc. (AFPI) and is for information purposes only. Although information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy. AFPI assumes no liability for the interpretation or use of this information. No portion of this writing should be construed as legal or accounting advice. All rights reserved.