Retirement is an exciting new chapter in life, and most workers are counting down the days until they can leave their jobs for good. But if you rush into retirement without a thorough plan, it could be a recipe for disaster.
Planning for retirement requires loads of preparation beyond simply saving money. There are a few other key factors that could potentially make or break your golden years, and if you're planning to retire in 2024, there are three critical questions to ask yourself right now.
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1. Do you know how your expenses will change?
Many people assume their expenses will lower once they retire, and that's often true to an extent. You may not have to worry about the costs of commuting to work, dry cleaning bills, or lunches at the office, for example.
However, if you plan to travel extensively or pick up pricey new hobbies once you retire, you could end up spending more than you expected. Retirement brings a lot of free time, and it's easy to spend a lot of money filling that time year after year.
That's not necessarily a bad thing, of course, as retirement is supposed to be as enjoyable as possible. But if you haven't accounted for those costs in your budget, you could end up draining your savings too quickly.
2. Do you know your expected Social Security benefit?
Millions of seniors rely on Social Security to make ends meet in retirement, and your benefits can be a fantastic supplemental source of income. But it's important to know how much you expect to receive, because it will let you know whether your savings are really on track.
Fortunately, it's possible to check your expected benefit amount by creating a mySocialSecurity account online. From there, you can see your statements with your future benefit amount based on your real earnings.
Keep in mind that this is the amount you'll receive at your full retirement age (FRA) -- which is age 67 for anyone born in 1960 or later. If you begin claiming before your FRA, your benefit amount will be permanently reduced by up to 30%.
When you know your estimated future benefit, it will be easier to determine how much you'll need to rely on your savings in retirement. If you find that you'll collect less than expected from Social Security, it's better to know that now while you still have some time to beef up your savings.
3. Do you have a plan for healthcare?
Healthcare costs can be extraordinary in retirement. In fact, the average 65-year-old couple retiring in 2023 can expect to spend around $315,000 on out-of-pocket healthcare costs throughout retirement, according to data from Fidelity.
Medicare can help with many healthcare costs, but it doesn't cover everything -- including routine physical exams, dental care, and prescription eyeglasses, for example. It also generally doesn't cover long-term care (such as nursing home stays), which can cost tens of thousands of dollars per year.
A Medicare Advantage plan can offer more coverage, and long-term care insurance may also reduce your future costs if you end up needing that type of care. But these are extra expenses that you'll need to start budgeting for now.
There's a lot of preparation involved in retirement, and it's not always easy. But the more thorough you are now, the more comfortable and enjoyable your senior years will be.
