For many people, day-to-day budgeting and financial planning can seem daunting. Fast-forward to retirement, with the stress of not having your regular paycheck, and this can make managing your finances seem even more overwhelming.
To help alleviate this stress, you may need to look at your savings in a way that will help you meet your retirement goals and keep you feeling secure no matter what life throws at you. Here are a few tips and strategies to help you do just that as you plan for your future.
Find your income. One of the biggest adjustments to retired life is not getting the steady income you've grown accustomed to while employed. It helps to think about how you will turn the money you have saved and any benefits you may be collecting, such as Social Security or pension income, into retirement income.
For starters, determine your expected monthly retirement income and adjust your monthly savings to fill any savings gaps. Think about your income needs in retirement rather than getting nervous about hitting one big number. Consider all the assets you'll be able to leverage in retirement, including your retirement savings. Expenses play a key role in a successful income strategy, so try to at least estimate monthly retirement expenses.
As you near retirement, think about your withdrawal schedule for your savings and how to time receiving Social Security or pension benefits to best fit into your monthly income plan. By setting a sort of "pay schedule" for your retirement funds, you'll be able to feel more confident that you have the money you need for a secure future.
Plan for health care. According to the Voya Retire Ready Index, 91 percent of Americans express concern about the inability to pay for health care expenses in retirement. This is where your retirement income plan can really help give you some peace of mind. By breaking down future savings and needs into anticipated monthly income and expenses, you will be better prepared to cover regular health care costs. Additionally, should any major or unexpected costs arise, you'll be able to identify areas in your budget where you can reallocate funds to cover those expenses.
As you head into retirement, also consider meeting with a financial advisor to talk about what health care options are available to you. Often, retirees assume that Medicare will cover all of their needs, but there are some conditions and procedures that may fall outside Medicare and take you by surprise. Meet with an advisor or even talk to your doctor to determine what supplementary plans you could enroll in to make sure you have all the coverage you need in retirement.
Time your Social Security benefits. Social Security decisions are often another major stress for preretirees, with 88 percent of workers reporting concern about having fewer benefits than expected, according to the Voya Retire Ready Index. What many people don't realize is that their plans for retirement may mean they are not fully maximizing Social Security benefits.
Voya Financial found that 59 percent of retirees started taking Social Security benefits before age 65. The Social Security Administration has specific definitions of "full retirement age," currently set between 66 and 67 years old. If Social Security is claimed before this age, benefits are generally reduced, but if you delay your retirement up to age 70, your benefits generally increase.
Maximize retirement accounts. You may similarly be missing out on retirement benefits by not taking full advantage of workplace retirement accounts. If you are enrolled in a 401(k) or similar plan through your employer, find out if it matches your plan contributions. This match is essentially "free" money, so don't leave in on the table. Every dollar that you put away (even if it's just a small amount) will have a major impact on your finances in retirement. Taking advantage of an employer match program will make those dollars go even further. By saving and utilizing all the resources available to you, you can be well-positioned to turn savings into a reliable stream of retirement income when the time is right.
Planning for retirement can seem like a long and difficult process, so be sure to have a plan. Think about your finances in terms of your lifestyle and what new adventures you may want to have. By setting a budget today and maximizing your benefits, you'll be well-positioned for success.