If you're thinking about retiring in 2024, you must make sure you're truly prepared to leave the working world behind for good. To do that, there are four questions to answer before you even consider giving notice.
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1. How much money will you need?
If you're a year or less away from retirement, you should have a clear idea of what your budget will be once you've stopped working. Consider how much the following will cost you:
- Housing
- Groceries
- Transportation
- Healthcare
- Clothing
- Savings
- Debt repayment
- Entertainment and travel
By establishing how much money you'll need as a retiree, you can make certain you'll be able to cover the necessities and your discretionary expenses without a paycheck coming in.
Most people need to replace somewhere between 70% to 90% of what they were earning before retirement. You may find you need more if you have grand plans to travel the world. It's helpful to know that now so you can begin planning for it.
2. Where will your income come from?
You'll also want to make sure you know exactly where your income is going to come from to fund your living expenses in retirement. That way, you can determine if you'll have enough of it.
For most people, income comes from Social Security and retirement investment accounts. The amount of your retirement benefits will vary based on the age at which you claim them, so sign into mySocialSecurity.gov to figure out what size check you'd get if you retired and claimed benefits in 2024.
As for your retirement investment accounts, you'll need to maintain a safe withdrawal rate while drawing from them to supplement Social Security. For most people, this means you will not withdraw more than 4% of your principal balance in year one and will adjust your withdrawals to keep pace with inflation each year thereafter.
Confirm how much money you'd have if you took money from your investment accounts and supplemented it with Social Security. If you have other income sources, like income from rental properties or a pension, factor that in as well. Then, make sure your income exceeds your planned expenses.
3. Where will you get health insurance?
Health insurance is vital for retirees, as medical care needs usually increase with age.
If you will be 65 when you retire, you can claim Medicare. But you're still likely going to need to supplement these government benefits, as they don't provide as much coverage as you think. Start researching your options now for Medigap or a Medicare Advantage Plan to see what plans are available and how much they'll cost.
If you won't be 65 at the time you retire, you'll need to explore where your coverage will come from. This could be a spouse's employer if your husband or wife plans to keep working. Or you could buy individual coverage, or potentially stay on your employer coverage using COBRA.
You'll need a plan and an idea of how much this will set you back financially, so you can be prepared to stay insured after retirement.
4. How will you spend your time?
Finally, start thinking about how you'll spend your time. This can affect your finances, of course, but also your well-being. Many people lose their sense of purpose after retiring, and you don't want to be one of them.
By considering the answers to all these questions, you can make sure you are really ready to retire by the time 2024 comes along.
