7 Ways To Be Money Smart In Retirement
Written By Emma Sturgis
For how long do you intend to be retired? Have you thought about it? According to the Social Security Administration, although the average age for a 65-year-old man or a woman in the United States today is either 84.3 or 86.6 respectively, “About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.” That means that depending on when you decide to retire, you could be retired for 20 to 30 years. The real question, then, is this: what do you do with your available money to maximize your golden years?
1. Take Your Social Security Benefits at the Right Time
For most seniors, Social Security will be the centerpiece of your retirement income. You are penalized for early retirement, so make sure you check the SSA website to find your full retirement age. If you start collecting right at your full retirement age, you will still collect a smaller amount than if you start collecting later, but you will collect the smaller amount longer. Be advised, that if you need to sign up for Medicare, it must be done regardless of whether you elect to start collecting Social Security.
2. Withdraw from Your Retirement Accounts Wisely
If you have more than one type of retirement account to choose from, you need to do so with your eyes wide open. When withdrawn, 401k monies incur income tax, while simple IRA monies incur capital gains tax. Depending on your personal income tax rate at the time that you need to withdraw the money, it may make more sense to withdraw the money from your IRA instead of your 401k.
3. Make Minimum Withdrawals from Tax-Deferred Accounts before the Deadline
All tax-deferred accounts have a limit as to how long you can keep the money in the account. Be mindful of these limits because the penalties are very steep. Do your research, keep yourself organized, and use a calendar to remind yourself of important dates and help yourself budget.
4. Register for Medicare On Time
Many private health plans have age limits attached to them. Read through your health plan carefully to see if yours does. If it does, make sure that you enroll in Medicare on time. There may be penalties if you don’t follow the recommended timeline. In order to ensure you have the coverage you need, research and register for Medicare at the appropriate time.
5. Live Within Your Means
This is one of those concepts that many people know but don’t practice. Living within your means doesn’t mean you have to live like you have nothing. It never hurts, though, to try to maximize your dollar. If you have already established the habits of clipping coupons, shopping around for the best deals, and limiting your dining out expenses, don’t stop! If you haven’t, give it a try for a few months, and you’ll see what a difference it makes.
6. Create a Maintenance Plan for Your Home
One of the largest monthly bills, other than housing and car payments, that people have to pay is their energy bill. Creating and following a regular maintenance plan, one that includes regularly cleaning your air filters, for example, can help reduce those costs. You can also compare electricity rates to ensure that you’re getting the best price for your specific needs. It’s important to regularly update your home to be more energy efficient, and regularly compare your rates to others to ensure you’re not paying more than you should be.
7. Keep Your Financial Records Organized
It is always important to keep your records organized, but it is even more so in retirement. It is helpful for yourself and also for your family if everything has a place and is in that place. By establishing an organized budget that is based on your income and financial accounts, you will ensure that your transition into retirement is smoother and one well enjoyed.
You have finally made it to retirement, the Golden Years that are to be thoroughly enjoyed. By following the seven tips above, you will better be able to handle your finances and ensure your retirement goes smoothly.