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You’ve worked hard and you’ve reached the point in your life when you’re considering retirement. How can you decide if the time is right? Here are a few questions t
This is a critical question if you are going to meet your needs and wants and enjoy your new life in retirement. Assessing your post-retirement financial situation can be challenging because it can be hard to determine exactly how much income you will have or what your expenses will be. As a starting point, it is possible to get a sense of what your Social Security income will be based on your Social Security earnings record and the age you choose to retire by using the calculators on the Social Security Administration site. Try, as well, to estimate the income you will receive from other sources, such as pensions and investments and any consulting or part-time work you plan to do.
It’s also possible to create a budget of your expenses in retirement using your current expense budget and making any potential adjustments, such as lower housing costs if you expect to downsize or pay off your mortgage. You can update your income and expense estimates annually as you get closer to retirement to be sure they remain realistic. How long will you need your retirement income to last? Those who reach age 65 today can expect to live an average of about 20 more years, according to the Social Security Administration, but keep in mind that one-quarter of those will live past age 90. To estimate the cost of your needs during retirement, check out this Life Expectancy calculator.
You can begin receiving Social Security benefits as early as 62, but as tempting as it sounds, that may not be your best choice. If you start collecting benefits before your full retirement age, they will be reduced. If you wait until full retirement age (which varies based on the year you were born), you’ll get a higher monthly benefit. Put off retirement until age 70, however, and your benefits will be even higher. Your CPA can help you understand your options and make the best decisions for you.
This question is top of mind for many people. Only 54% of workers are very or somewhat confident that they will be able to afford medical expenses in retirement, according to an Employee Benefit Research Institute survey, and only 38% think they’ll be able to count on the same Medicare benefits that retirees receive today. It’s wise to factor potentially higher health care costs into your retirement budget planning.
Copyright 2017 The American Institute of Certified Public Accountants.