You’ve planned to make retirement budget during your working years, and its time to enjoy the fruits of your labor. But, that doesn’t mean your financial planning is over. You’ll still need to make a money plan to live out each stage of your golden years. Here are financial aspects to consider in your plan as you progress through retired life.
1. Review Safety Nets To Make A Retirement Budget
If you still have life insurance or accidental death, you’ll want to consider if these costs are worth the benefits. All of these are designed to replace lost income from someone getting injured or prematurely dying during their working years. This isn’t a consideration for someone who’s income is limited to a pension and/or Social Security.
2. Review Medical Needs
At age 65, you can apply for Medicare. The current cost of Medicare Part B is just over $135 per month. But, it only covers hospital-related expenses. You’ll want to consider what part B doesn’t cover as they’re applicable to your medical needs. These include overseas medical costs, dental, vision, hearing, prescription drugs, long-term care, therapies, medical equipment, and routine doctor visits. It’s important to review your medical needs as they begin to change. This way you can change your coverages during open enrollment each year.
3. Plan For Taxable Income
You’ll want to use the IRS table to determine the required minimum distribution (RMD). This relates to any tax-deferred accounts like an IRA or 401K. At age 70.5, you need to start withdrawing funds kept in such accounts. You may also factor the RMD into your finances because withdrawals are taxable income. Unlike a 401K, money from IRAs must be withdrawn regardless of whether you’re still employed by a company or not. Keep in mind that multiple IRAs are treated as a single account in regard to the withdrawal demands.
4. Home Maintenance
If you’re still living in a home you own, hear this. You may want to budget for physically taxing maintenance tasks that you’re no longer able or willing to do.
5. Find Out If You Qualify For Local And State Tax Benefits
Depending on where you live, you may find a number of tax reliefs for senior citizens. Some states waive part or all of your tax obligation on Social Security income, pensions, and/or employee plans. Most states give a property tax break to retirement-aged homeowners for their primary residence. In fact, some of these state and local tax breaks are so appealing with savings of thousands per year that many seniors relocate just to receive them.
6. Add Budget Flexibility Through Semi-Retirement
Many seniors are working past their Social Security retirement age to get larger checks later. Others are using semi-retirement. This includes moving to part-time or changing careers to a less demanding job. It props their budgets and give them greater flexibility now and later. Both are helpful to couples where a head of household is older and will retire several years before the spouse.
In closing, consider all six of these points as you make your budget for retirement. Remember that specific expenses are likely to change even after you retire. Prudent planning can help ease you through some very dramatic transition phases you’ll likely experience throughout your golden years.
This is not legal or financial advice. Please consult a legal or financial advisor for your specific situation.
Resource
Lam, Jackie. “Budgeting in Retirement: Years 5 to 10. ”Quicken Loans, Quicken Loans, 4 Mar. 2019, https://www.quickenloans.com/blog/budgeting-retirement-years-5-10
