Ready, get set, stop! That’s the problem if you do not plan to retire!
Last month we looked at How to Prepare for Retirement, Part 1, covering some of the many steps you have to take to get ready for your retirement. Retirement as a goal is not as easy as it may seem. You are not just retiring from work but you are retiring into something. What that “something” is can be defined by you if you plan ahead and work hard towards reasonable goals. If you don’t plan ahead well, that “something” may just happen to you and it may not be something you want. The old saying “if you fail to plan you have planned to fail” has a lot of truth to it.
So, what do you need to plan for and how can you do it? The checklist of areas and a few ideas you need to consider long before you retire continues here.
Just as you need to re-balance your investments, you also need to re-examine your insurance. Insurance needs change over time. Life insurance that made sense to protect your spouse and children when you were younger and the supporter of your household may no longer be the best expense for limited retirement dollars. The type of insurance, whole life, universal life, term life, etc. may be something you want to change. You may have a life insurance policy with cash value that might be better placed in securities, however, consider the tax consequences first. That financial adviser you should have hired (see last month’s article) can help with this decision.
You may drive less and have less risk so your auto insurance policy and limits may no longer fit your lifestyle. If you are a two car household, you may want to drop to one car which will substantially reduce insurance costs, among other costs such as gas and oil that will decrease.
Your old health plan may need to be re-thought as well. Your health needs and risks have changed as you have aged. If you plan to travel in your retirement, you need to check and see if your coverage applies out of state and especially out of the country.
You may also wish to consider adding long-term care insurance. A significant percentage of people will need the services of home health care as they age and the need usually comes at a time when financial resources are not at their best. A good long-term care insurance policy can quite literally be a life-saver. See More on Long-Term Care for more on this topic.
You should always test the waters by getting competing insurance quotes for home, auto, health and umbrella insurance coverages. Insurers tend to raise rates systematically, expecting that you will not notice most increases and just stay with them. Consider that as your car ages, the premiums, at least for collision coverage, should decrease. Checking every few years for competing prices on identical coverage can save hundreds and perhaps even thousands of dollars.
This is not a new concept; have a bucket list. What is it that you want to do with the extra time God has now allowed you to have? Rest and recover from too much work is a good first goal, but that is one goal that should at most take a short time to fulfill.
Start with ten good specific goals. This is serious! Write them down and at a minimum, in your mind, decide how and when you will reach each goal. Be specific, nothing like “travel more.” Pick a place you want to go, research it and select a date. Then do it!
The unfortunate truth is that the longer and harder you have worked in a career or profession, the harder it is to retire. Many retirees think they can do nothing and be happy. Some are right, but most are wrong. For some who could do nothing, deteriorating health and declining happiness lie in their future. Shifting from working hard to doing nothing is neither what God intended for our bodies or what we need.
One thing is certain, you can find activities and ways to serve God and keep moving if you look around and ask questions.
Will you need money for these activities? Yes, but the range of expense is broad, allowing you to self-limit your out-of-pocket expenses, and with a little effort you can find local inexpensive activities, service projects, book clubs, hobbies, walking clubs, hiking groups, etc.
You will have extra time available. However, if you work at it, you will likely end up like most active retirees and exclaim, “I don’t know how I ever found time to work!”
There are other changes, some of which will require more time and inflict more change than you might expect.
Where you live
Downsizing is a common event as a facet of or shortly after retirement. That big house which was necessary when the kids were growing up is now a big responsibility and a lot of work. However, there may be a lot more involved in retirement than just downsizing. One common event is the snowbird move to warmer territory, including Florida. Shoveling snow is one of those annoying responsibilities that becomes more physically demanding as you get older and is no longer necessary because you are no longer tethered to your job.
Even if moving and downsizing are not in your immediate future, there are other changes that may help make your home better and safer for your future. See Aging in Place and Making Your Home Senior-Friendly for more discussion on this issue. Some of those steps you can turn into do-it-yourself projects, others will certainly require a professional.
If a move is in your future, plan carefully. Do it right the first time by moving to the right community with the appropriate levels of care. Moving is expensive and physically demanding and you do not want to do it more than is absolutely necessary. You may wish to consider a senior center that provides continuous care.
Other parts of your financial life
There are several common things that are often surprises to new retirees. They include:
While you worked, your employer withheld taxes. If you owned your own business you may already know what is coming – you will have to pay quarterly taxes and plan that expense into your budget. If you live in a state with a state income tax, you will likely have to do two estimated tax returns.
You worked hard and put money aside into IRAs or into a 401(k). That was wise and prudent financial planning. But realize this, Uncle Sam wants his money! To prevent people from avoiding taxes too long, built into the tax code is a requirement that at age 70 ½, IRAs, 401(k)s and 403(b)s as well as most pre-tax retirement accounts, a required minimum distribution (RMD) comes due. There are no RMDs for Roth IRAs under the law in effect when this article was written. Paying attention to RMDs is extremely important. Miss one and the penalty is substantial.
There is a lot bad but also a lot good that can be said about Social Security. No, the return on your money is not impressive, not even close to securities or real estate. But then, you couldn’t pull the money out early and spend it either and the money includes amounts paid into Social Security by your employer that help you in your retirement.
However, there still are decisions to be made and issues to consider. The first decision is when you claim Social Security. You can draw early at age 62, but your benefit will be quite a bit lower than if you work longer and wait. You can draw full retirement at an age that is now a moving target, but for the sake of this article, let’s call it 66+. At the time this article was written, early 2018, the full benefit age is 66 years and 2 months for people born in 1955. That age will rise over time to 67 for those born in 1960 or later. Early retirement benefits will continue to be available at age 62, but they will decrease to even less than they are now. When the full-benefit age reaches 67, benefits taken at age 62 will be down to 70 percent of the full Social Security benefit and benefits first taken at age 65 will be reduced down to 86.7 percent of the full benefit.
For more detail on the rising Social Security full retirement age, go to the site linked here.
Medicare and either a supplement or advantage plan
You become eligible for Medicare, Part A, at age 65, but no one should ever think that Medicare covers all health insurance costs. You will have to wade through the alphabet soup of Medicare and the confusion on supplemental plans, also called Medigap, and Advantage Plans under Medicare Part C.
A quick summary is as follows:
Medicare Part A is hospital care and is free. Coverage is limited.
Medicare Part B is medical and doctor care and there is an income based premium. You can delay signing up, but there is a cost if you do, increased premiums that stay elevated for a life-time.
Medicare Part C allows for what are called Advantage Plans.
Medicare Part D is for prescription medications. Some prescription medications become amazingly inexpensive or even become free, but many others remain very costly. Part D is not mandatory but there are increased costs to you if you start part D coverage late.
Do you start with Medicare as soon as you reach 65? If you reach age 65 while you still have children dependent on you and age 26 or lower, they may be covered under your employer’s health coverage. That may give you an incentive to remain employed at least until they are age 26 or become self-supporting and get their own coverage.
See Helpful Medicare Sites for more access to informative sites on this issue as well as on many other issues.
Don’t go through this without expert advice. There are free advisers (also known as sales persons, so be cautious) who can walk you through the many options and the many carriers. What is available changes from county to county and state to state, so it is literally impossible to know what works for everyone.
Your estate plan
As your finances shift into retirement mode, know that family and financial changes probably require a re-examination of your estate plan. If you have no estate plan, start now, without delay.
If you are an Idlewild Baptist Church member and a widow or widower, often The Idlewild Foundation can provide free estate planning. Contact our office for more details at (813) 264-8713.
See A Few Estate Planning Pitfalls for more details on how the mere passage of time and the change of life circumstances can make an estate plan that was once wise into a terrible estate plan. If you do not know a qualified attorney who can assist you, call The Idlewild Foundation at (813) 264-8713.
Your Spiritual Life
Yes, even your spiritual life may change. You will, at least in theory, have more time to serve, a lot more time to volunteer, and even more time for fellowship with your friends from church.
Just because you have retired does not mean the needs of your church for volunteer help has dropped. You actually now have more time to be involved in some of the simple day-to-day service that makes a church a blessing to its members. Hospital visitation, calling or visiting the shut-ins, helping others during times of crisis such as right after the death of family members, and many more activities occur where most churches welcome volunteer help.
You have the time and the church has the need. That sounds like a formula for useful service.
Social Security benefits are income. Income from your investments is also income. Just because you have retired does not mean the financial needs of your church have decreased. You can tithe and give generously from your retirement income.
Make your giving planned giving as well. Have an estate plan and put God into that estate plan. Giving to hospitals, universities, and charities is certainly good. Giving to your families is good, although you must always consider whether the money will do harm. For more on that, see Are you going to give your kids money to burn? Just don’t forget who made it possible for you to have enough to give away and why you have it in the first place.
God made it possible for you to earn, make and save as well as to hold and enjoy what He has given you.
18 But remember the Lord your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your ancestors, as it is today.
God has also given you what you have not for you to hold it and hoard it, but for His glory and so you can be generous with it.
2 Corinthians 9:11
11 You will be enriched in every way so that you can be generous on every occasion, and through us your generosity will result in thanksgiving to God.
We have all seen some folks who seem to have the attitude that they have “put in their time” in service. Service isn’t a punishment, it is a blessing. Yes, you need to willingly make room for the next generations to follow you in service, but no one should ever be put out in the pasture to rest. Caleb served God and fought for him well into his 80’s. Caleb was blessed for his wholehearted service. Numbers 14:24, Joshua 14:14.
There is no age given in the Bible for retiring from worship. Nothing about the concept of worshiping the King of Kings and the Lord of Lords gives even a hint that anyone of any age should ever even pause. He is worthy of worship and praise.
4a For great is the LORD and most worthy of praise;
Now get out there and enjoy the time and the life God has allowed you to have.
About the Author
John Campbell has retired from a 40-year legal practice as a trial attorney in Tampa. He has served in multiple volunteer roles at Idlewild Baptist Church in Lutz, Florida, where he met Jesus. He began serving as the Executive Director of the Idlewild Foundation in 2016. He has been married to the love of his life, Mona Puckett Campbell, since 1972.