Retirement Planning Tips for the Last 10 Years of Your Career
Submitted by Wealth Management Services Group LLC on February 21st, 2017
Are you in the homestretch of your career? Can you see retirement approaching quickly on the horizon? While you may still be fully immersed and engaged in your career, you also may have one eye on retirement. Specifically, you might be thinking about what steps you can take so you’re fully prepared when the big day arrives.
The actions and decisions you take over these final working years can have a big impact on your retirement readiness. Obviously, you should continue to save as much as possible. If you are age 50 or older, you can take advantage of catch-up contributions, which allow you to contribute to your 401(k) and IRA beyond the traditional limit.
Saving isn’t the only important planning step, though. There are other actions you can take while you’re still working to minimize risks and enhance your financial stability in retirement. Below are a few action items to consider:
You’ll likely file for Medicare benefits as soon as you are eligible. Medicare is a valuable resource for retirees, as it covers a wide range of medical treatments and costs. It doesn’t cover everything, though. For instance, Medicare doesn’t cover dental care, treatment provided overseas, long-term care and more. Even on the care that is covered, Medicare usually only partially covers the costs, and there’s no cap on your out-of-pocket share.
That means you will likely face substantial out-of-pocket health care costs in retirement. In fact, Fidelity estimates the average 65-year-old couple will pay $260,000 out of pocket for health care in retirement.1
You can prepare for these costs by building a health care nest egg. Your HSA could be a great vehicle for doing so, as it allows you to grow your funds tax-deferred and then take tax-free withdrawals for medical costs. By building a health care reserve fund, you can avoid draining other assets.
That health care cost estimate from Fidelity doesn’t even include the cost of long-term care. The U.S. Department of Health and Human Services estimates that 70 percent of retirees will need long-term care at some point.2 Long-term care is extended assistance with basic living activities such as bathing, dressing and eating. It’s usually provided in a facility or in the home. It can be costly and may be required for years.
Consider purchasing long-term care insurance as a way to protect against these costs. Most policies cover care either in a facility or in your own home. Some also have death benefits, so your loved ones will get some of the funds if you don’t fully use the coverage.
You may want to look at long-term care insurance earlier rather than later. Since it’s insurance, there is an underwriting component. The older or unhealthier you are, the higher your premiums are likely to be.
Life can change quickly, and those changes aren’t always for the better. No matter how sound and solid your retirement plan may be, there’s always the risk that an unexpected event could throw it off track.
For example, you could become disabled and unable to continue working. You could be forced into early retirement by a job loss. Your family could face a medical emergency that forces you to pull money from your savings.
These things happen, which is why it’s important to have a backup plan. Consider how you might adjust if your retirement doesn’t go exactly to plan. Could you downsize to cut costs? Could you work part time or delay your retirement date? Hopefully you won’t need to take these actions, but it never hurts to have a plan in place.
Ready to plan your retirement strategy? Let’s talk about it. Contact us at WMS Group for more information. We welcome the opportunity to help you analyze your needs and create a plan. Let’s connect soon.
1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
2http://longtermcare.gov/the-basics/who-needs-care/
The actions and decisions you take over these final working years can have a big impact on your retirement readiness. Obviously, you should continue to save as much as possible. If you are age 50 or older, you can take advantage of catch-up contributions, which allow you to contribute to your 401(k) and IRA beyond the traditional limit.
Saving isn’t the only important planning step, though. There are other actions you can take while you’re still working to minimize risks and enhance your financial stability in retirement. Below are a few action items to consider:
Contribute to a health savings account (HSA).
You’ll likely file for Medicare benefits as soon as you are eligible. Medicare is a valuable resource for retirees, as it covers a wide range of medical treatments and costs. It doesn’t cover everything, though. For instance, Medicare doesn’t cover dental care, treatment provided overseas, long-term care and more. Even on the care that is covered, Medicare usually only partially covers the costs, and there’s no cap on your out-of-pocket share.
That means you will likely face substantial out-of-pocket health care costs in retirement. In fact, Fidelity estimates the average 65-year-old couple will pay $260,000 out of pocket for health care in retirement.1
You can prepare for these costs by building a health care nest egg. Your HSA could be a great vehicle for doing so, as it allows you to grow your funds tax-deferred and then take tax-free withdrawals for medical costs. By building a health care reserve fund, you can avoid draining other assets.
Consider long-term care insurance.
That health care cost estimate from Fidelity doesn’t even include the cost of long-term care. The U.S. Department of Health and Human Services estimates that 70 percent of retirees will need long-term care at some point.2 Long-term care is extended assistance with basic living activities such as bathing, dressing and eating. It’s usually provided in a facility or in the home. It can be costly and may be required for years.
Consider purchasing long-term care insurance as a way to protect against these costs. Most policies cover care either in a facility or in your own home. Some also have death benefits, so your loved ones will get some of the funds if you don’t fully use the coverage.
You may want to look at long-term care insurance earlier rather than later. Since it’s insurance, there is an underwriting component. The older or unhealthier you are, the higher your premiums are likely to be.
Develop a Plan B.
Life can change quickly, and those changes aren’t always for the better. No matter how sound and solid your retirement plan may be, there’s always the risk that an unexpected event could throw it off track.
For example, you could become disabled and unable to continue working. You could be forced into early retirement by a job loss. Your family could face a medical emergency that forces you to pull money from your savings.
These things happen, which is why it’s important to have a backup plan. Consider how you might adjust if your retirement doesn’t go exactly to plan. Could you downsize to cut costs? Could you work part time or delay your retirement date? Hopefully you won’t need to take these actions, but it never hurts to have a plan in place.
Ready to plan your retirement strategy? Let’s talk about it. Contact us at WMS Group for more information. We welcome the opportunity to help you analyze your needs and create a plan. Let’s connect soon.
1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
2http://longtermcare.gov/the-basics/who-needs-care/
