Financial Planning for Retirement

It’s natural to dream about all the fun things you can do when you are planning for retirement. That’s why it’s so important to start thinking about your financial future, so that you can fulfill those dreams. It doesn’t matter if you are in your 30s or your 60s, it’s never too soon or too late to start financial planning for retirement.

If you are considering a senior living community as part of that plan, the staff at Branchlands can sit down with you to discuss the costs and benefits of the different levels of care. For instance, monthly rent at Branchlands Independent Living includes weekday dinners and continental breakfast, housekeeping, transportation, most utilities, and a 24-hour emergency medical call service.

People are living longer, and that is especially true of residents of senior living residences like Branchlands. This great news is even more reason to have a plan to navigate the financial uncertainties that come with a long life journey. Read along to learn more about financial planning that can help set you on the path to retirement.

Establishing Your Retirement Goals

As with most things in life, it’s a good idea to have a financial retirement strategy and not just wing it. Creating a plan now can help ensure you don’t run out of money in the future. The first step is to establish goals. When do you want to retire? Where do you expect to live? Part of the planning process involves managing your health, finding your purpose in retirement, and establishing your legacy. A key component will be determining the budget you will need to live the lifestyle you want in retirement.

Planning Your Budget

There are risks you are going to want to consider when creating your retirement budget. These risks include longevity, inflation, health care costs, long-term care costs, and the stock market. The personal finance magazine, Kiplinger, dives more deeply into these topics that are important to evaluate when creating your budget.

Budgets can also be affected by house mortgages and car loan payments, as well as any other debt you may still be paying off. Managing debt is crucial because it determines when you can retire. The general consensus is that you will need 70 to 80% of your pre-retirement salary to live on during retirement. However, some people may spend the same or more due to inflation, healthcare, and cost of living if they move to a more expensive area. Building your emergency fund will be helpful if unexpected expenses arise during retirement that your social security benefits or monthly investment check may not cover.

Whether you meet with a financial advisor or tackle your retirement financial planning on your own, completing a budget worksheet will be the first step in your financial plan. Your budget will evolve year after year once changes occur, such as taking required distributions from your retirement accounts and enrolling in Social Security. An excellent resource for all things retirement is the Retirement Podcast Network. Here, you can download podcasts that will explore many of your financial questions.

Managing Your Investments and Distributions

Prior to retirement, one step in managing your money is reviewing your investment approach and adjusting your asset allocation. Since the markets could drastically shift, you don’t want to be solely in aggressive high-risk funds and stocks in your 50s and early 60s when you are nearing retirement. Traditionally, keeping a portfolio that balances risk based on your age and resources is recommended so that you are insulated from the highs and lows of the stock market. Having an investment strategy will help you withstand the whims of the market. The Motley Fool offers some tips on asset allocation that will have you examine your risk tolerance and the diversity of your holdings.

The timing of investment withdrawals can make all the difference in how much you will have to spend each month. One popular approach suggests taking 4% of your retirement funds the first year of retirement and continuing with that every year while adjusting for inflation. However, these general guidelines may not be right for every person. Some retirement planners believe this rule makes people too conservative, so they avoid having fun during their early retirement or Go-Go years, the most active years for seniors, even though people spend less as they age.

The market conditions at the time of retirement will play a key role in what that amount may be. It’s best to speak with a qualified financial advisor unless you are a savvy financial planner.

Determining When to Take Social Security

Part of your budget may include the Social Security benefits that you paid for during your working years. Although you can start taking Social Security benefits at 62, you won’t get your full benefits until you turn 67 (or a little sooner if you were born before 1960). The longer you wait, the more you will make, but you must start taking benefits by the age of 70, or there will be penalties involved. It’s a big decision that will affect your entire retired life, so you must consider your health, family longevity, and your current financial needs.

Around 1 out of every 3 65-year-olds will live until at least age 90, and 1 out of 7 will live until at least age 95, according to the Social Security Administration (SSA). To help you determine when the best time for you to start taking your benefits based on your financial picture, AARP has a calculator. A financial advisor can also assist with this.

Not everyone qualifies for Social Security, but you may be able to receive the benefits of a former spouse or survivor benefits from a family member. If you are a surviving spouse, surviving divorced spouse, unmarried child, or dependent parent, contact the Social Security Administration to see if you qualify for monthly survivor benefits.

People are also working longer, and there’s good news for those who wish to stay employed whether part time or full time. You can collect social security while working and keep all your benefits if you are of full retirement age. But, if you are not at full retirement age, then the SSA will deduct some of your benefits.

Signing Up for Medicare

Mark your calendar for three months before the month you turn 65. That’s when your Medicare enrollment period starts and it ends three months after your 65th birthday month, for a total enrollment period of seven months. The Medicare website can seem overwhelming, but there are places you can gather with people entering the same phase of life. The Center at Belvedere in Charlottesville offers financial wellness sessions on various topics including Social Security and Medicare to help you while you are financial planning for retirement. At Branchlands, we offer a class to our residents called Medicare 101 Bingo.

An average retired couple age 65 in 2023 may need about $315,000 saved (after tax) to cover health care expenses in retirement. If taxable accounts are used, that amount might be higher when factoring in potential taxes paid. Health Savings Accounts are helpful ways to save money for medical expenses. You can contribute pretax earnings to the accounts and withdraw money tax-free for qualified health expenses.

However, for some, Medicare may not be enough. It’s important to budget for the unexpected as well. You may also want to get other types of insurance, such as long-term care insurance.

Although we all hope to live happy, healthy lives, sometimes we are faced with a health event that can be very costly. A nest egg for incidents like this should be part of your budget, or you may want to consider long-term care insurance. A person who is currently 65  has nearly a 7 out of 10 chance of needing long-term care at some point in their life.

The Manor House at Branchlands

Retiring at Branchlands

At Branchlands, we can be part of your long-term care plans by providing a continuum of care when you need it. Branchlands offers independent living, assisted living, and memory care options. When you are ready to take that next step on your life’s journey, we will be there to help you live your retirement life to the fullest. Plan a visit today.

We are not financial planners and this article in no way constitutes financial advice. Please contact a professional financial planner for any assistance with your financial planning for retirement.