For many Americans, retiring comfortably is the goal after years spent working and paying taxes. Retirement allows seniors to spend time with their loved ones, travel and enjoy their lives free of constraints of regular employment. There are a number of steps that should be taken to ensure a senior is able to live a comfortable, stress-free life after retirement.
Workers should learn how to maximize their savings, budget, use Social Security benefits and prepare for health care costs that may arise while a person is retired. Whether you are an adult looking for retirement planning advice or a senior preparing to transition into retirement, the provided information can help you make the right choices for your future. Use the following budgeting, savings and health care planning tips to make the most of your retirement period in the U.S.
Budgeting for Retirement
One of the most important aspects of planning for retirement and managing finances after being retired is budgeting. Having a planned retirement budget allows you to make smart choices for the lifestyle you would like to have while being retired. With careful planning, your budget can allow you to live within your means and avoid the stress that comes with running out of money as a retiree. Implementing safe spending practices early on in adulthood helps develop a practice of avoiding overspending and making the money you have available last. Budgeting also allows you to save more money in the long run. Unspent money can be used as you see fit: as extra income for emergencies, to pay for things you enjoy during retirement and more.
To create a budget, you should compare the amount of money you will be receiving from all income sources with your essential cost of living each month. Consider the cost of rent or owning a home, food, insurance, transportation and health care when calculating essential expenses. There may be other expenses to add into your budget, such as Internet, cable, cell phone bills and more. The importance of these expenses is up to you. Next, subtract your total expense amount from your anticipated income each month. When the essential cost of living has been covered by your income, the amount left over can be used toward traveling, eating out, going to movies and other enjoyable experiences and items. Even if you started saving for retirement later in life, budgeting, investing and figuring out your ideal retirement age can help you create savings to help you live comfortably.
Turning Savings Into Income
When developing a retirement plan, many workers are concerned about whether their retirement savings will last throughout their entire lifetime. Luckily, there are ways to increase retirement income from the money a person has already saved through smart financial practices. Learning how to generate income from retirement savings is a great way to supplement monthly retirement benefits. You will be able to enjoy retirement without being stressed about whether your savings will cover your living expenses for the foreseeable future.
Before exploring the options to maximize retirement savings, you should calculate the amount of money you will need per month in order to cover essential cost of living expenses. After this, consider the amount of income you have saved or will potentially save for retirement over your lifetime. The figures allow you to determine the income amount needed to cover your expenses each month, and how long your savings will cover these expenses.
You should also consider any additional income you will receive during retirement, such as Social Security. With these calculations in mind, you can begin employing the methods that fit your financial and personal needs to turn your retirement savings into income. Investments and annuities are just two of many ways to help increase your savings and ensure you will have financial coverage throughout retirement.
Using Social Security Benefits Wisely
In the U.S., Social Security benefits in the form of monthly payments are provided for seniors who have worked and paid taxes throughout their life. Americans preparing for retirement should understand their options for collecting Social Security income after a certain age. There are many factors that determine the amount of benefits a senior is eligible to receive: previous yearly income, employment status, age, birth year, extra income to be collected during retirement and more.
Learning about the Social Security program and what rules and regulations apply to your specific situation allows you to be prepared for the process of applying for benefits when the time comes. You can even estimate the amount of Social Security benefits you will receive each month using your previous income information in order to plan for retirement.
Knowing when to sign up for benefits is important, because this time frame determines when you will start receiving Social Security and the amount you will collect. Depending on your personal, financial and employment situation, you may want to begin receiving payments early or at the full retirement age. If you begin collecting benefits before reaching the retirement age, the amount received each month will be lower because the period where you are receiving benefits is longer. However, it could be beneficial to apply for Social Security early if you are still employed in your early 60s and meet the income eligibility requirements to collect benefits without reducing payments.
Planning for Health Care Costs
Workers should always consider their future cost of health care when creating a financial plan for retirement. Health insurance during retirement is very important for seniors, who face more health problems and related costs than other Americans. Although Medicare provides insurance benefits for eligible seniors, the program does not cover many health care costs such as deductibles, copays and premiums. Furthermore, Medicare does not cover certain medical services that may be important to seniors.
To avoid being overwhelmed by medical bills when you are retired, you can set aside savings specifically for future health care payments and plan for anticipated health care costs during retirement. Consider your overall health and any chronic conditions and/or diseases you have to help determine your yearly health care cost. Compare this figure with the health services and costs covered by Medicare or your insurance company to estimate how much money you will have to pay out of pocket for medical expenses during retirement.