When should I begin taking Social Security?
Many people do not know when they should start taking social security. When an individual starts taking the benefits early on in their life they receive less income every month while if they decide to get their benefits later on in their life they receive more income every month. A lot of individuals view this as a straightforward question and take the most appealing choice which is the option that results in more money going into the pocket. A decision as easy as this one can result to your family missing hundreds or thousands of benefit money. It is essential that one evaluates critically how the decision they make on the social security will impact their retirement plan. Factors such as longevity, inflation, assets in your possession, tax rates, if you intend to work partially and the necessity for a constant source of income.
How Long Will the Money Last?
This question is asked by almost every individual nearing retirement and it is a tough one to give a concrete answer. Answering this question with a concrete answer requires an individual to calculate how much they spend, the duration of time they expect to be alive, the savings return rate, investment returns, expected medical bills and the tax rates charged. After making an estimation of all these factors it is possible for an individual to calculate the estimated period of time which the retirement money will last. It is however advisable that an individual considers all possible scenarios such as if the returns on savings and investments turned out to be lower than expected. Planning for all eventualities will be an ideal approach to determining the period of time taken before your retirement funds run dry.
How Much Money Do I Need to Retire?
The amount of money required in order for an individual to retire depends on various factors the main one being their daily expenses. Individuals who have held steady jobs throughout their lives and spent very little of their earnings are likely to retire with a hefty monthly pension as opposed to individuals who spend most of their earnings in order to fund their extravagant lifestyle. The individual who saved more and spent less is likely to retire live comfortably off their pension while the extravagant spenders may need to save hefty sums of money before retiring if they want to lead the same lifestyle after retiring or they can become content with living on less after retirement. There are easy techniques that can be used to give an estimation of how much funds you will require in order for you to retire.
Should I Buy an Annuity?
Annuity is a type of insurance policy that allows an individual to insure their income throughout their life. This policy is however most ideal for individuals who do not have their income covered through any other method. Individuals with pensions and social security do not require purchasing annuity as the pension and social security will cover most of the expenses you will incur after you retire. If your source of income is not reliable you might consider purchasing annuity which will make a small portion of your income secure for future purposes.
How Much Will I Spend?
The amount of money spent after retirement varies from one individual to another. There are those individuals who will spend more as they travel the world and indulge in their hobbies while there are some who hardly spend as their transport, meal and cleaning bills are largely chopped off. Determining how much you are currently spending will help you in making a projection of what you are likely to spend once you retire. You can increase or decrease the current expenses to have a rough idea of what you would need on both ends of the spectrum. If there is no health insurance policies in your workplace add medical bills to the expected expenses.
How Will I Pay for Medical Expenses in Retirement?
Most health care plans usually start when an individual turns sixty five but the downside is that it covers about half of your medical bills. An individual will have to top up for treatments involving teeth, eyes, ears, premiums in part B of Medicare, additional insurance packages like Medigap policy or long term care insurance. The price of the medical bills will vary depending on the region of residence.
Should I Take My Pension as a Lump Sum?
There are numerous individuals who decide to opt for social security that puts more money in their pocket without evaluating the significance or impact it will have on their life after retirement. The pension plans in organization give the employee a choice of it being annuity or collecting it as a lump sum. Annuity should be the most preferred choice as it guarantees the security of that portion of your income.