Good Question: How to transition to retirement?
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Question: I'm preparing for retirement in 2013. What can I do to make this a smooth financial transition?
Answer: Congratulations on your impending retirement. After many years spent working, you deserve to relax and enjoy life. Assuming you have been setting aside the appropriate amount of funds to consider retirement, there are some things you can do to make a smooth financial transition.
First make sure you are vested in your company's pension fund, if it has one. Most employees have to be employed a certain number of years before becoming vested in the pension.
In addition, you also want to consider if you will apply for your Social Security retirement benefits. You are eligible to receive benefits at age 62, but if it works for your finances, you may want to delay the start of your benefits until you're 70. According to Social Security, if your full retirement age is 66 but you elect to receive benefits at 62, the amount you receive will be approximately 25 percent less than at full retirement age. If you wait until age 70 to start collecting, you will receive approximately 32 percent more each month. For example, at 62 you would receive $750 monthly, at 66 it would be $1,000 and at 70 the monthly amount increases to $1,320.
When preparing for retirement not only do you want to plan for living on a fixed income, but also you need to consider some extra expenses, including health care. If you retire before age 65, you are not eligible for Medicare, which means you will have to purchase private health insurance. Private health insurance can be costly but necessary to maintain your health. Begin investigating plans prior to retirement so you will be prepared and understand the financial burden it may be.
As you consider the additional expenses, don't forget to consider ways you can save money each month. Transportation costs may be reduced because you no longer need to get to and from work each day. If your schedules permit, you and your spouse may be able to share a vehicle instead of maintaining two.
Investigate senior citizen discount programs. Most movie theaters or restaurants offer senior citizen discounts. Always ask for eligibility.
When planning to retire, it's important to map out what your monthly budget will look like. Consider your budget as it is now.
Take into account your income, expenses and debt. Are there any debt payments that you're currently making that you can eliminate by the time you retire? If you can, make that a priority before retirement. Look for ways to save some extra money now while you're still working, when retirement comes you will have a fund set aside for emergency expenses.
Next, you'll want to examine what your finances will look like on your retirement income. Attempt to estimate the monthly income you will receive from retirement plans and Social Security and see if you will be able to meet your financial obligations.
Retirement should be a time of relaxation, not financial strain. Plan ahead and develop a realistic budget plan for yourself now, while you're still working.
First Published February 10, 2013 12:00 am