Preparing for Retirement: 11 Steps to Secure Your Future

Every worker pays into Social Security in hopes of being able to rely on this income in retirement.

Eligibility: If you’re 62 or older and have worked and paid SS taxes for at least 10 years, you’re eligible for Social Security retirement benefits.
Marital status: If you’re married, widowed, or divorced, you may have additional options for claiming Social Security based on your spouse’s work record.
Claiming age: You can start claiming Social Security benefits at 62. However, the longer you wait (up until age 70), the more you will get. For example, claiming at 62 may reduce your benefits by as much as 30% compared to claiming at your full retirement age (which varies depending on your birth year).

Using the mySSA calculator at www.SSA.gov, you can see a personalized estimate of your future monthly retirement benefits. You can use this number as a starting point to determine how much you will need from other money sources to fill in the gap and reach your ideal retirement income.

If you’re fortunate enough to have a pension plan through your employer, here are some things to consider:

Type of plan: Understand whether you have a defined benefit plan, which pays a fixed amount regularly, or a defined contribution plan, where you and possibly your employer contribute to a retirement account.
Payout options: Some pension plans offer various payout options, such as lump sum, single life annuity (payments for the rest of your life), or joint-and-survivor annuity (ongoing payments that continue to a spouse after your death). Evaluate which option aligns best with your financial needs and family situation.
Inflation: Consider that fixed pension payments might not keep up with inflation. Think about strategies to offset the potential decrease in purchasing power over time.
Pension and Social Security interactions: In some cases, having a pension might reduce the amount of Social Security benefits you’re eligible for, particularly if you didn’t pay Social Security taxes on the earnings from which your pension is based.

Find the Right Time to Retire

Deciding when to retire is a big decision. While there is a stated “full retirement age,” you’re not required to retire at this exact age. Some people retire early, and some work longer.

Consider the points below when deciding the best time for you to retire:

Your financial situation: It’s vital to ensure that your retirement savings and investments are sufficient to maintain your lifestyle.
Your Social Security benefits: The age at which you start claiming Social Security benefits will affect the monthly amount you receive. Waiting until full retirement age or longer can increase these benefits. Claiming early will reduce your benefits.
Your health: Healthcare can be a significant expense in retirement, especially if you retire before you are eligible for Medicare. It’s necessary to consider your health and plan to cover healthcare costs.
Your debts and liabilities: If you’re married or in a long-term partnership, discussing retirement plans and goals is critical, ensuring your expectations and financial objectives are aligned.
Market conditions: The economy and financial markets can impact investments and retirement savings. If market conditions are unfavorable, it might be worth waiting if you can.
Your emotions: Retirement is a profound life transition. Be sure you feel emotionally ready to leave your career and change your daily routine.

The sooner you start planning for retirement, the better. Talk with a financial advisor to make a retirement plan specific to your goals.

Retirement Planning FAQs

Retirement preparation can be daunting. Here are some quick answers to common questions.

How Much Should I Save for Retirement?

The amount you should save for retirement varies based on your desired lifestyle, income sources, expenses, and expected retirement age, among other factors.

A common rule of thumb is the 4% rule, which suggests saving enough to withdraw 4% of your retirement portfolio each year to cover your expenses. For example, if you need $40,000 a year from your savings, you should aim for a retirement portfolio of $1 million.

How Can I Estimate My Social Security Benefits?

You can estimate your Social Security benefits by creating an account on the Social Security Administration’s website, www.SSA.gov, and using the mySSA calculator. This tool provides personalized estimates based on your earnings record.

Remember that the age at which you start claiming benefits affects the amount; delaying until full retirement age or later can increase your monthly benefits.

Can I Continue Working After Retirement?

You can continue working after retirement, but it may impact your Social Security benefits. Learn more at www.SSA.gov.

What Are the Key Healthcare Considerations for Retirement?

Healthcare costs can be a significant expense in retirement. Medicare becomes available at age 65, but you’ll need to secure other health insurance if you retire earlier.

Additionally, Medicare doesn’t cover everything, so many retirees opt for supplemental insurance. Estimating healthcare expenses, considering long-term care needs, and evaluating insurance options as part of your retirement planning are important.

Should I Pay All My Debts Before Retiring?

Ideally, entering retirement with little to no debt will provide more financial freedom. However, it’s not always feasible.

Evaluate your debts and prioritize paying high-interest debts, like credit cards.

Mortgage or low-interest loans might not need to be paid off entirely if you have a solid financial plan, but reducing liabilities before retirement can help reduce financial stress.

Find More Expert Advice in Quotacy’s Blog

Remember that long-term growth is more important than short-term gains when planning for retirement. The longer you let invested money go untouched, the greater it accumulates due to compounding interest. Before retiring, only touch your funds designated for retirement if it’s an emergency.

Estate planning is an integral component that should be considered alongside retirement planning. Our comprehensive Estate Planning Guide can help you through the essential steps of creating a personalized plan that caters to your unique needs.

Find more information about retirement, financial and estate planning, and life insurance in our blog.

This article is for general educational purposes only and is not written by a financial advisor.