Coping With Retirement - Preparation for retirement

The single biggest concern to most retirees is finance. With Social Security under constant scrutiny by the government, it is important that everyone consider what money they have coming in from sources other than the Social Security program.

Start planning for your retirement by figuring out exactly what money you will have coming in, and when, for your retirement. Questions you will need to investigate include:

  1. • What are you and your spouse's pension benefits from work?
  2. • How are these benefits affected by the death of the spouse, before and after retirement age?
  3. • What are you scheduled to receive from Social Security?
  4. • What are your savings and other benefits worth?
  5. • What other sources of income will be available to you after retirement?

You should fill in the Request for Earnings and Benefit Statement form SSA-7004 every three years to insure that the government records of your earnings are accurate. They are only obliged to correct your records for the previous three years. This also keeps you informed of what you are entitled to for your income credits. The form is available through all Social Security offices.

You should also be aware that the age of retirement for Social Security is no longer strictly held at 65 years of age. For people born between 1954 and 1960, the age is 66. For those born in 1960 and after, the age is 67. There is a reduction of payments related to your age, if you retire early.

Once you have figured out what money you have coming in, you need to do a budget for what you will be spending after retirement. This is tricky since inflation and property-cost fluctuations can be hard to predict. However, it is better to guess than to just ignore this step.

You need to figure out basic expenses, and then extra expenses and perks. If you would love to sail around the world, don't just assume you can't do it. Calculate it into your retirement needs and see if you can save enough now with investments to allow for your dreams.

Basic expenses should include as a minimum:

  1. • Property and income taxes
  2. • House repairs, rent, and other living quarter expenses
  3. • Medical insurance and expenses
  4. • Food, clothing, and day-to-day purchases
  5. • Expenses remaining for children (college, etc.)
  6. • Emergency income for nursing homes, catastrophic illness or other incapacitating problems
  7. • General entertainment and activity costs

Once these are down on paper, discuss what your goals and ambitions are for the years ahead. Budget in those expenses. Some possibilities include, but certainly are not limited to:

  1. • returning to school
  2. • traveling
  3. • pursuing a hobby
  4. • moving to another climate
  5. • starting another career or business

Assume that you will live to at least 95. This way you likely to have enough for the majority of your retirement. You are better off overpredicting, rather than underpredicting, your age at death.

Calculate your expenses for the total of the thirty years. You can set inflation at 5% or higher, or use a guide to retirement earnings. Then figure out what you will have as income when you retire. If you have enough saved, and enough pension to provide for all your needs, then you are set for retirement. If not, you need to calculate what you have still to save.

There are several guides available for a more exact method of predicting costs and savings. The American Association of Retired Persons (AARP) can guide you to sources. Their address is: 601 E Street, NW, Washington DC, 20049; phone (202) 434-2277.

When to Retire

Once you have figured out your financial needs and earnings for retirement, you can estimate how many years you have saved for, and how many years you still need to work to gain enough income to provide for retirement. If you can afford early retirement, and you have activities that would fulfill you, it should be considered as an option. If you find that you have to continue working beyond the time you had assumed for retirement, you may be able to manage with less hours or a job with less pressure without influencing your pension.

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