Transitioning into retirement is an exciting phase of life, and for many workers, the countdown to leaving their jobs for good has already begun. However, rushing into retirement without careful planning can lead to unexpected challenges. Beyond simply saving money, thorough preparation is essential for a successful retirement. If you’re planning to retire in 2024, there are three critical questions you should address right away:
1. How will your expenses change?
It’s common for people to assume that their expenses will decrease once they retire, which may be true to some extent. Expenses like commuting, work-related clothing, and lunches at the office might no longer be a concern. However, if you plan to indulge in extensive travel or costly hobbies during retirement, you could end up spending more than anticipated. With the newfound free time that retirement brings, there is a risk of overspending year after year. While enjoying retirement to the fullest is essential, failing to account for these costs in your budget could lead to quickly depleting your savings.
2. What is your expected Social Security benefit?
Thousands of retirees depend on Social Security for their income. It’s important to know your expected benefit amount to determine if your savings are sufficient. You can check your estimated benefit by creating a mySocialSecurity account online. This account will provide statements with your future benefit amount based on your earnings history. Keep in mind that the benefit amount provided is for your full retirement age (FRA), which is 67 years for those born in 1960 or later. You may be permanently reduced by up to 30% if you claim your benefits before you reach your Full Retirement Age (FRA). Knowing your estimated future benefit will enable you to gauge how much you’ll need to rely on your savings during retirement. If you find that your Social Security benefits are lower than expected, it’s better to know early so you can make adjustments to boost your savings.
3. Do you have a plan for healthcare?
Healthcare costs in retirement can be substantial. The average 65-year-old couple retiring in 2024 is estimated to spend around $315,000 on out-of-pocket healthcare expenses throughout retirement, according to Fidelity data. While Medicare can help cover many healthcare costs, it does not include everything, such as routine check-ups, dental care, prescription eyeglasses, and long-term care expenses, which can be significant. Considering a Medicare Advantage plan or long-term care insurance can provide additional coverage and reduce future healthcare costs. However, it’s essential to budget for these extra expenses early on.
Retirement preparation involves careful planning and consideration. While it may require effort, the more thoroughly you prepare now, the more enjoyable and comfortable your senior years will be.