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Countdown to Retirement

May 2, 2011

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When your retirement date is only a couple of years away, take steps to ensure that all financial arrangements are in place. Some items to consider include:

• How much will you spend annually during retirement? You probably looked at these numbers when planning for retirement, but take one final look based on your current retirement plans. Don’t wait until after you retire, when your options are more limited. Based on this analysis, you may decide to postpone retirement or look for ways to reduce your expenses.

• What is the value of your total retirement investment portfolio? You may be saving through a variety of retirement vehicles, such as 401(k) plans, individual retirement accounts (IRAs), annuities, and personal investments. Analyze your entire portfolio, estimating how much income can be expected after retirement. When you retire, you may need to make changes to your portfolio, including reallocating some investments, deciding how to invest a lump-sum distribution, or making arrangements for monthly income distributions.

• Have you checked with your employer regarding pension plan benefits? Pension benefit choices are usually irrevocable, so evaluate your options carefully, especially when choosing between an annuity and a lump-sum distribution. Ask your employer to calculate your benefits based on different retirement dates. You may find that delaying retirement by a few months can increase your benefits.

• Do you know how much to expect in Social Security benefits? The Social Security Administration now sends Social Security Statements to all workers aged 25 and older approximately three months before their birthdays. The statement estimates your Social Security benefits at age 62, full retirement age, and age 70. Review these estimates as well as other pertinent factors to decide when to start benefits. Apply for benefits at least three months before you want to receive them.

• Will you work after retirement? Working can help significantly in funding a long retirement. However, be aware that earnings that exceed certain limits can reduce your Social Security benefits if you are under age 65. In addition, once certain income levels are exceeded, a portion of your Social Security benefits is subject to federal income taxes.

• How will you provide for health insurance? Find out what health insurance benefits your employer provides after retirement, if any, and how much you must pay for those benefits. If you retire before age 65, you may have to purchase health insurance yourself until you qualify for Medicare. Even with Medicare, you’ll probably want to investigate Medigap insurance so you aren’t left unprotected in key areas.

• Have you reviewed other financial areas, including other types of insurance and your estate plan? Make sure you have sufficient life insurance and look into long-term-care insurance. Review your estate plan to make sure it still reflects your wishes for the disposition of your estate. Retirement is a major change in your life. It is usually a good idea, before then, to review all financial areas and make any necessary changes.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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