7 Frequently Asked Retirement Questions
Retirement is a bittersweet moment, saying goodbye to your officemates and the work you love (or hate) and saying hello to a new phase of so-called freedom. It is also a moment that can give you the anxiety of what the future holds when you finally retire. It makes sense that a lot of questions will bombard your mind. To help you with that, here are the most frequently asked retirement questions and answers to put your mind at ease:
Question #1: How will I pay for my medical expenses in retirement?
Answer: Medicare, Medigap and Long Term care insurance
Once you turn 65, you are eligible for Medicare health coverage. Medicare can help you pay your medical bills but not everything. On average, Medicare only covers about 50% to 80% of your total bill; the rest will be out-of-pocket costs. You will also have out-of-pocket expenses for eye care, dental, vision, and long term care because Medicare doesn't cover it.
For additional premiums, you can maximize your Medicare coverage with Medicare Part B, or supplemental insurance such as long term care insurance and Medigap plans.
Healthcare expenses can be staggeringly high. According to the recent Fidelity Studies, a couple might need about $275,000 to sustain their healthcare needs in retirement. Because of its massive cost, it is important to include health care in your retirement plan and know the options available so you can handle this need efficiently.
Question #2: When should I start withdrawing my Social Security benefits? Answer: The later, the better. But still, it depends on your current financial landscape
One of the major decision that every retiree should make is when to start taking his Social Security benefits. It can be confusing and tempting to splurge this benefit as it puts money quickly in your pocket. But before you give in, think and analyze your situation first. Your decision can make or break the rest of your retirement income.
Take note of this: Your Social Security funds grow by a specified number of a percent every year you delay withdrawing. Therefore, the amount you'll get depends on how early or how late you start your benefits. Starting at the wrong time can cost you and your family thousands of missed benefits. So, before you decide, consider how the benefit you'll get can holistically affect your retirement. Think about your retirement income, longevity, guaranteed income, inflation, tax, etc., what will happen in the long run if you start getting your benefits early or late. Take time to do the math.
Question #3: How much money do I need to retire?
Answer: It depends on a lot of different factors
No one knows exactly how much you'll need to retire. The answer to this question is dependent on different factors such as longevity, healthcare needs, the lifestyle you choose, hobbies and activities you'd like to do, gifts you want to give, charities and organizations you'd like to join, places you'd like to see, and so much more!
Some retirees are already comfortable with spending little money and don't need to have a lot in retirement. While others are used to spending a lot and should have a lot of savings to sustain their lifestyle or find a way to spend less while maintaining to live comfortably.
Question #4: How long will my money last?
Answer: Again, the answer depends on a lot of factors.
How long your money will last is a difficult question to answer and also depends on how you spend it in retirement. Due to new found freedom, retirees are often tempted to splurge themselves and go on a spending spree. If that happens, then it is easy to think that your retirement savings will dry out soon before you even notice.
Think of different scenarios that you might face in retirement that you will need to spend money, such as healthcare and travel. Think how much you'll need for each situation if you need to spend a lot or less.
Question #5: Do I need an annuity?
Answer: You might not need an annuity if you have sufficient income sources that are guaranteed to sustain most of your needs or retirement living expenses
If you are short of guaranteed income sources in retirement, it may be best to get yourself an annuity so there will be something that you can rely on a minimum amount of income in your future.
Question #6: How much will I spend in retirement?
Answer: It depends on your retirement budget
To have a picture of how much you will spend in retirement, sit down and examine your current spending. Estimate which of your current spending will most likely go up once you retire and which ones will go down. Don't forget to factor in the premiums that you will need to pay, repairs (house or cars), gifts and donations, hobbies, activities, travel expenses, etc. Don't forget to include healthcare costs and premiums that you need to pay out-of-pocket!
Question #7: Is taking my pension in Lump Sum a good idea?
Answer: Think of your entire financial picture first before you decide how you will take your pension
Pensions are commonly offered in a lump sum or annuity option that pays you a monthly income for life. Now depending on your financial landscape and longevity, decide if taking it as a lump sum will have a more significant benefit than taking it monthly.
About the Author
As the Online Content Director of FreeMedSuppQuotes.com, Leandro Mueller aims to push for awareness and promotion of the many benefits of Medigap plans. He plans to accomplish this through writing informative and compelling content, which is to be posted on several avenues online. Leandro hopes to push the envelope when it comes to explaining the many details one needs to tackle with Medicare Supplement Plans.