October is National Retirement Security Month. But what does retirement security mean to you? And how can you work to achieve it?
Here are some suggestions:
â¢ Build your resources. While you work, save in tax-advantaged accounts such as your IRA and 401 (k) or similar employer-sponsored retirement plan. In your 401 (k), contribute at least enough to win your employer’s match, if one is offered, and increase your contributions each time your salary increases. Remember, especially early in your career, time is often your greatest asset. Make sure you save early, because the longer you wait, the more you’ll need to save to reach your goals.
â¢ Look for ways to increase your retirement income. As you transition into retirement, there are steps you can take to align your income with your needs. For example, consider social security. You can start collecting it as early as 62, but your monthly payments will be much larger if you can wait until âfullâ retirement age, generally between 66 and 67 years. (Payments will âcapâ at age 70). If you have sufficient income from a pension or your 401 (k) and other retirement accounts, and you and your spouse are in good health and have a family history of longevity, you may consider delay enrollment in social security. You may also want to explore other income-producing vehicles, such as certain annuities designed to provide income for life.
â¢ Prepare for unforeseen costs. During your retirement, you can anticipate some costs, such as accommodation and transportation, but other expenses are more irregular and not always predictable, such as those related to health care. Even with Medicare, you could easily spend a few thousand dollars a year on medical bills. You may also want to consider the possibility of needing some type of long term care, which is not usually covered by Medicare and can be quite expensive. According to Genworth, an insurance company, the average annual cost of a private room in a nursing home is over $ 100,000, and it’s about $ 55,000 per year for a home aide. To meet these costs, you may want to consider some form of protection, such as long-term care insurance or life insurance with a long-term care component.
â¢ Do your estate planning. It’s hard to feel completely secure in retirement if you’re not sure what might happen if you have an unexpected health problem, become incapacitated, or die sooner than expected. That’s why you’ll want to create a comprehensive estate plan, which might include documents like an enduring power of attorney, a will, and a living trust. A review of your insurance coverages and your beneficiaries can also help you protect your assets and make sure they are distributed the way you want. To create your plan, you will need to work with your financial advisor and a legal professional, and possibly your tax advisor as well.
Thinking holistically about your retirement security and developing and executing a strategy aligned with your goals can help you enjoy one of the most rewarding times of your life.
This article was written by Edward Jones for your local Edward Jones financial advisor.
Edward Jones, SIPC member