Preparing to retire can be an exciting time. Like starting a new job, getting married, buying a home or having a baby, it is a major life change that warrants celebration — but may also potentially represent some financial changes.
To ease the transition, you’ll need a financial plan before you retire. You should know your:
Fixed income sources
Variable income sources (such as a part-time job or dividend payments)
If you’ve been saving and budgeting while you work, you probably have a good idea of most of these numbers. But take note of what might change when you retire. You’ll also want to make sure you know how to access any additional income that may be coming your way, and when you’ll claim that income.
Consider When You’ll Claim Social Security
You can claim Social Security retirement benefits as early as age 62. But should you?
You can claim increased benefits through delayed retirement credits, which you’ll earn if you wait to start collecting until you reach full retirement age or later. For each year you delay collecting Social Security, up to age 70, your benefits will increase. It’s important to know your full retirement age, which, as GOBankingRates previously reported, varies according to when you were born.
Waiting to collect Social Security until you max out your benefits may not be the best choice if you need the income now to maintain the quality of life you want in retirement. It all depends on your other income and investments.
Understand Your Pension
You’ll want to know if your present job — or any past jobs — entitle you to a pension. If so, weigh your options and perhaps speak with a financial planner to determine your best course of action. You may opt for a single life pension or select the joint and survivor option. If you die before your spouse and took the single life option, it could leave them short of funds, according to MarketWatch. Your life insurance and other investments will factor into your decision.
Review Your Investments
If you have multiple 401(k) plans, individual retirement accounts and other investments, you may want to speak with a financial planner about consolidating them. It can make things easier at tax time and also make it easier to keep track of your money.
Consider Healthcare and Long-Term-Care Costs
Retirees over the age of 65 qualify for Medicare, but if you are retiring earlier than that, you’ll need to decide on a healthcare plan and how you’ll pay for it. Even enrolling in Medicare requires some hard decisions, as there are many options if you decide to enroll in a Medicare Advantage plan.
It’s also a wise idea to think about long-term-care insurance. Assisted living residences and nursing homes can cost thousands of dollars a month, and LTC insurance can help cover those costs.
Think About What You’ll Do When You Retire
Even with all your financial considerations taken care of, your retirement planning isn’t over, Marketwatch noted. Decide what you want to do with all your extra free time to stay active and engaged and avoid depression in your later years.
In fact, visualizing your retirement could be one of your first steps in planning, since it will — at least partially — determine how much money you’ll need to retire.
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This article originally appeared on GOBankingRates.com: Social Security, Pensions and More To Consider in the Months Before Retirement