Retirement Planning – Already Retired?

Apr 30, 2012

By Staff writer State Farm™ Employee

Even if you’re already enjoying retirement, you may still have questions about your savings and spending, or other to-do items on your planning list.

Review Your Income Sources

When you’re retired, your goal is to maximize and protect your income sources so you can live comfortably and worry-free for the remainder of your life.

You may consider leaving a portion of your investments in a higher-risk, or aggressive, allocation adjusted for a longer timeline. In addition, you can place two to three years of expenses in a liquid account – such as an interest-bearing savings, checking or money market account – to help safeguard against market downturns. It may be worth a visit with a professional, who will review your asset allocation and re-determine your comfort with investment risk.

Of course, you need to decide when to begin receiving Social Security benefits. You can start drawing benefits as early as age 62, but you’ll receive more money each month if you wait until your U.S. government-deemed full retirement age. Your benefits will continue to increase until age 70.

If you haven’t yet filed for benefits, you can easily estimate how much you can expect from Social Security. Knowing your approximate benefit amount is essential if you’re planning to rely on it for retirement income.

Regardless of when you plan to begin drawing Social Security benefits, or what your full retirement age is, you must apply for Medicare three months before your 65th birthday to avoid delay in the start of your Medicare Part B coverage. Keep in mind that you may also need a supplement plan to cover the gaps where Medicare falls short, as well as a prescription drug plan.

How Much Money Should I Spend?

One of the most common mistakes you can make is withdrawing too much money during your first few years of retirement. After all, you now have all the time in the world to do everything you’ve been planning. But while you may have saved the suggested 70 to 80 percent of your previous yearly income to live on, you certainly don’t want to overspend and risk running out of cash.

People are living longer than ever before, and therefore drawing on retirement savings for a longer period of time. A 2010 study by the Employee Benefit Research Institute found that 41 percent of Americans in the lowest pre-retirement income level will run short of money after 10 years of retirement. After 20 years, 29 percent of people in the second-highest income level will run out, as will 13 percent in the highest income level.

You should consider putting together a realistic post-retirement budget, since you now know how much you need each month for housing, food, and hobbies, and for unplanned expenses, such as a lingering mortgage or other debt. You may find you need less, or more, than you anticipated pre-retirement. With your needs in hand, tailor a sensible plan specific to your needs and goals.

Find Other Income Sources

You might consider generating additional income if you’re finding retirement expensive. More and more retirees work during their golden years, either because they need the money to make ends meet or miss the structure a job provides. If you’re healthy enough to work, you may consider consulting or finding a part-time position in a new field.

If you’ve already started collecting Social Security, your benefits will be reduced $1 for every $2 you earn over the current earning limit until you reach your full retirement age. Good news, though: Once you hit your full retirement age, your benefits are recalculated, taking into account the months that benefits were withheld. Plus, you can then work as much as you want, with no earning limits.

Annuities can also help protect you against outliving your income. An annuity is a contract offered by an insurance company, which makes a series of payments to you in exchange for a single premium or series of premiums. These payments can continue for a defined length of time or an indefinite period, such as your lifetime. Deferred annuities begin at a set time in the future and help you accumulate money for future use.

Keep Planning

Your future doesn’t end at retirement. Estate planning will help ensure you’ve protected your family’s interests as well as your own.

An estate plan involves the creation, conservation, and distribution of your property. Your estate plan may be simply a last will and testament, or it might also include life insurance, trusts, business continuation plans or charitable arrangements. Regardless, you should create an estate plan that pays estate expenses, including federal estate tax, provides your family members with income after you’re gone, and distributes your assets to family members and other heirs with the least amount of loss possible.

Estate planning is an ongoing process. Review your estate planning documents once a year, or when life changes necessitate it. Outdated and irrelevant documents may be as helpful to your loved ones as no documents at all.

Relax And Enjoy

Remember, you’ve earned your retirement through years of hard work and savings. Enjoy this time in your life. But always be aware of the time that still lies ahead, and plan accordingly.

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