Although you may be looking forward to your retirement, envisioning it as an opportunity to focus on your hobbies, doing part-time work on an interesting business project, or enjoying traveling to places you’ve always wanted to visit, it will also be a time of psychological change. In fact, after you retire you might even look back wistfully on the things you currently find challenging: managing your busy family life and showing up for work on time.
Since you may have strongly identified yourself with your family or career roles, you may feel a loss of identity when you retire, perhaps discovering that you now have less interest in what to do and more interest in reinventing yourself. Your retirement years will also be a time to catch up on deferred dreams, mend broken relationships, and reflect on what you’ve learned from your myriad life experiences.
Before deciding on the best financial vehicles to adopt to replace the loss of your current income, you need to anticipate some of your future expenses. These will include additional expenses for medical care and retirement income taxes. You may also decide to help your family out when it comes to dealing with the high cost of burial expenses, which averages about $12,000. PolicyZip explains in some detail how getting burial insurance will make it possible to pay for a funeral.
Let’s take a closer look at each of these three additional expenses:
Health Care Expenses
If you’re eligible for Medicare after age 65 and you’re already committed to a healthy lifestyle, you might be able to decrease these expenses, but you’ll still have out-of-pocket medical costs and premiums for your Medicare Part B. One way to manage this expense will be to increase your contributions to your Health Savings Account with your company’s deductible health care plan.
If you have Social Security, you don’t have to be concerned about paying taxes after your retirement, but you will have to report IRA, 401(k) plans, 403(b) plans, and 457 withdrawals as taxable income. Additionally, pensions, annuity distributions, investment income, and any gains from the sale of your home will also be taxable.
If you don’t set aside money for burial expenses, your loved ones will have to bear the burden of funeral costs. One solution to meet this expense will be to get burial insurance, which can be purchased as a pre-need funeral plan from a licensed specialist.
>Retirement Financial Planning
Understanding what retirement costs you will face will make it easier to plan for your financial retirement. For one thing, you’ll have some idea of what to expect when you retire; for another, you’ll feel motivated to set aside the time necessary to put together a retirement plan. Creating a financial plan is something that you should decide sooner rather than later. This is something you should decide now so that you have enough time to get things organized rather than when you retire when you’ll have fewer options.
If you’re familiar with financial management, then think about how to set up a tax free retirement income and max out your retirement account contributions, how to build an emergency fund, and how to make low risk investments.
However, if you’re not sure about how to go about arranging your own financial plans, then you should speak to certified financial planner or a certified retirement counselor to work out a viable plan of action. Before deciding on the services of a particular financial advisor, do your due diligence about their business integrity and reputation for offering sound advice.