If you retire before turning 65, you aren’t old enough to qualify for Medicare. You need to consider the health insurance premiums. If you qualify for COBRA (Consolidated Omnibus Budget Reconciliation Act), most employers are required to offer health coverage for at least 18 months after leaving employment.
Consider the premiums for COBRA, if you are used to having your employer paying for all or a portion of your insurance premiums, make sure you can afford this expense.
If you don’t have COBRA as an option, you will have to shop for insurance. Buying insurance directly from a carrier will likely be even more expensive than through COBRA.
If you retire before turning 59 ½, you will not have access to your 401K without a hefty penalty and taxes.
If you retire before turning 62, you are eligible for social security. You will lose 20% of your monthly payout but you will receive 36 more checks. For example:
Full benefit is $500 per month at 65 and $400 at 62
For 36 months you will receive $14,400.
If you waited until you are 65, it will take you 12 years to collect that $14,400:
$400 per month x 12 months x 15 years = $72,000
$500 per month x 12 months x 12 years = $72,000
At 77 years of age you will begin making up for those “lost” 36 months.
Pay off all debt, including credit cards, car loans and your mortgage before retiring, otherwise you may be back to work because your monthly income can’t cover your monthly expenses.
Prepare a budget, what will your cost of living be – list every expense and include inflation:
- Apartment rent or mortgage payment, if you didn’t pay off your debt before retiring
- House upkeep, condominium association dues or apartment rent increases
- Household needs
- Life Insurance premiums
- Healthcare cost including: premiums, deductibles, vision, dental and hearing aids
- Utilities – gas, electricity, telephone, cable, internet
Your expenses are totaled but the best retirement advice for you is to also include how you want to spend your time. If you have hobbies and activities you enjoy, or you want to travel, add how much you anticipate your activities, hobbies and other interest will cost.
List the income you expect to receive on a monthly basis: pension, social security, and any other steady income, such as interest income or stock dividends Subtract your estimated expenses from your monthly income. If your inflow is more than your outflow, you have enough to live on. Make sure you have an emergency fund.
If your inflow is less than your outflow, the best retirement advice includes looking at all of your investments: 401K, Certificates of Deposit, Stocks and Bonds, and any other investments. If you added the current value of all of your investments and divided by the amount you are short, how long will these funds carry you? For example, you need an additional $600 per month or $7,200 per year just to cover your necessities. Your only savings is a $100,000 in Certificate of Deposit
Your CD will last you almost 14 years.
Without any additional income, what will happen after the CD is spent? Your decision on when to retire is a key factor in answering this question because you could push back your retirement and pay off more debt or increase your retirement savings.
The best retirement advice for you doesn’t end with the financial aspects and at what age you should retire. You need to bear in mind how you plan to spend your time.
You need to have the income to pursue your hobbies or maybe you have already planned to play bridge at the country club with friends three days a week or you have always wanted to volunteer at a nursing home, after school program or hospital.
Lastly you need to make sure you follow the steps outlined with your employer, apply for social security and shop for insurance. Make sure all of your finances are in order and you believe you will be satisfied with a leisurely lifestyle. If you prefer the 60-hour work week and fast pace excitement of your job, will you truly be happy leaving your job.
Consider of the benefits of a retired life and if you will feel fulfilled.
The best retirement advice is to reap the benefits of your years of working but a thorough plan will save you the stress from living month to month without any enjoyment.
Assuming you are retiring from a job you enjoy, you probably don’t want to be forced to go back to work full-time. If you take a part time job, make it something you enjoy and don’t consider it work.