Throughout 2015 I’ve had the pleasure of sharing with GOBankingRates readers the tips, tricks and advice for enjoying a happier and earlier retirement. I compiled these tips while writing my book “How to Retire the Cheapskate Way.” As we end the year — and this series of articles — here’s a recap of some of the more important points:
1. ‘How much money will I need to retire comfortably?’
That’s the $64,000 question. And while the answer depends on a lot of individual variables, in most cases it’s likely to be a lot more than $64,000.
Beware that most financial planners use one-size-fits-all retirement planning models that fail to adequately take into consideration the dramatically different spending habits of would-be retirees. This weakness in planning models — coupled with the fact that many financial advisors have a vested interest (aka commissions) in selling you certain investment products — can lead some people to think they need a lot more in retirement savings than they probably do.
Become your own CFO (Cheap Frugal Officer) and really crunch the numbers of the spending side of your retirement budget to get a more realistic idea of the size of the retirement nest egg you’ll need.
2. ‘Is it realistic to think that I’ll spend less once I retire?’
Odds are your spending will drop as you age throughout retirement, at least according to the annual Consumer Expenditure Survey compiled by the U.S. Census Bureau. With the exception of spending on health care, the survey shows that average spending in virtually every other expenses category — transportation, entertainment, housing, food, etc. — drops significantly in retirement, particularly for those age 65 and older.
While your spending isn’t guaranteed to drop, the data is compelling for retirees as a whole and is worth considering as you develop your retirement lifestyle budget. Keep in mind, however, that many people report an increase in spending (particularly for things like travel and entertainment) in the early years of retirement.
3. ‘At what age should I begin drawing Social Security?’
In order to know the best answer to that question, you’d need to be able to foretell the future and, specifically, how long you’ll live. And while you have your crystal ball out, you might also need to predict how long your spouse and any other potential recipients of your Social Security benefits will live as well. That said, there are built-in financial incentives that encourage people to postpone drawing Social Security benefits.
Under the current system, for example, your monthly Social Security benefit will be about 75 percent greater if you wait until age 70 to start receiving benefits, as opposed to drawing benefits at age 62, which is currently the minimum age to receive benefits.
4. ‘In addition to basic Medicare Part A coverage, what other Medicare insurance do I need?’
Most Americans are entitled to Medicare Part A. Although there are plenty of pros and cons to paying for additional Medicare coverage, the decision of what — if any — health care coverage to carry during retirement depends on your individual financial situation and health care needs. Most of the retirees I interviewed for my book, however, elected to purchase Part B coverage, which covers some doctor fees and other expenses not covered by Part A, in addition to Part D coverage, which covers some prescription and generic prescription drugs.
5. ‘Should I buy long-term care insurance in case I need to spend time in a nursing home?’
As with any type of insurance, long-term care insurance is a question of affordability versus your risk of needing coverage in the future. Long-term care insurance tends to be expensive to the point where many retirees simply can’t afford it. Those who can easily afford it probably don’t need it, since they’ll likely have sufficient financial resources to pay for care when they need it.
For retirees with a net worth “in the middle” — that is, between $300,000 and $600,000 in net assets — long-term care insurance can come down to your particular health history and family situation. If you decide to opt in for long-term care insurance, make sure to do your homework; long-term care insurance policies are notoriously complicated and often have limitations and loopholes regarding what they actually cover.
6. ‘I’m interested in working part time in retirement. How can I find employers looking to hire part-time retirees?’
More and more retirees are now working part time during at least some of their retirement years, and they are increasingly doing so to both fill up their time and supplement their retirement incomes. The good news is that under current regulations, you can earn up to $15,720 from part-time employment while drawing Social Security without any decrease in your Social Security benefits. Websites like SeniorJobBank.org let you search current job listings with businesses specifically looking for older workers, and AARP.org runs regular feature articles on employers keen on tapping the retired workforce.
7. ‘Should I continue to carry life insurance once I’m retired?’
Depending on their finances and family situation, many older people elect to discontinue the term life insurance policies they secured when they were younger and in their income-producing years. Some retirees continue to pay for term life insurance, such as to cover final expenses and funeral costs or provide additional inheritance for heirs or charitable causes. However, with escalating premiums many people wisely drop their life insurance as they grow older.
Once you’ve stopped working, you can probably discontinue your disability insurance coverage as well, if you have it, since it’s designed to replace some or all of your income if you become disabled and can no longer work.
8. ‘I’m retired, and now I have more time than money. What can I do to fill my time without it costing me a lot?’
The good news is that older folks really are entitled to a lot of valuable discounts and other savings because of their age. Seniors can find everything from discounts at restaurants and movie theaters to a $10 Lifetime Pass to all National Park properties. But one of the most rewarding and enjoyable activities for many retirees is volunteering.
You might not have the surplus funds to support all of your favorite charitable causes once you retire, but in retirement you will have the time to support those causes as a volunteer. Websites like VolunteerMatch.org and Idealist.org can help you find volunteer opportunities near you.
Thank you to everyone who read along and sent in questions during this yearlong series. Here’s to achieving your retirement planning goals in the new year.