Five Smart Money Tips For Those Who Want to Retire in 2017
Retirement is a massive step and can be quite an ominous event for someone who has spent their entire adult life in a steady career. Choosing to retire demands multiple changes, including a large financial shift.
Not only do new retirees need to consider government programs that are now available to them, like signing up for Social Security or Medicare, but choosing to retire includes putting major thought into a changing lifestyle. If you’re considering retiring at some point in 2017, it’s important to consider these smart money tips to make your transition as smooth as possible and ensure your long-term financial security.
1. Decide When It’s Time To Leave Your Job
The first step in retiring is deciding when to leave your job. Understanding the full impact of your life and identity after leaving a career behind can take a lot of consideration. Working for even a few more months, or even another year, can help to vastly enhance your finances for a more worry-free retirement.
When it comes down to it, don’t make the big decision until you have mapped out your time-frame and budget considered over the entirety of the rest of your lifetime. Knowing where your money will come from and what payments and expenditures you’ll need to pay is important to your overall financial planning. The last thing you want is to be caught with no money in the final years of your life.
Enhancing your portfolio with extra time in your career or savvy investments can help provide you with the safety net later on for life’s surprises.
2. Think About Rolling Over Your 401(K)
You generally have a choice in moving your retirement savings over to your own personal retirement account or keeping it in your former employer’s 401(k) plan. Deciding whether to stay or go can be determined by the value of your plan. Often, an IRA opens up additional investment opportunities, so it may be a good idea to move your savings. Consolidating all your 401(k) plans from employers into a solo IRA can make it simpler to oversee your investments.
Though, if your employer’s existing 401(k) plan offers a broader range of investment options at sensible fees it may be in your best interest to leave it there. Either way, doing your research and looking at different low-cost IRA funds will put you in a position to make a smarter choice and extend the life of your savings.
3. Plan For Minimum Distributions
You are penalized for not taking out minimum withdrawals from a qualified retirement account each year after you reach the age of 70 1/2. You can be penalized by up to 50 percent of the amount that should have been withdrawn, in addition to the income tax that is due if you miss an IRA or 401(k) distribution.
The first required minimum distribution (RMD) goes into effect by April 1 the year that you turn 70 1/2. Recurring RMDs are then due by December 31st each year.
4. Register For Medicare In A Timely Manner
You are eligible for Medicare in a 7-month window (3 months before and 3 months after your 65th birth month). It’s crucial to register for Medicare within this period as a permanent penalty can be applied to your Medicare Part B and Part D premiums for failing to sign up on time.
If you are planning to work past the age of 65 and are on a group health insurance plan through your current job, you should register for Medicare within eight months of your retirement or the end of your health care plan to elude the premium penalty.
If you retire before you reach 65, keep in mind that you will need to find health insurance from an alternative source until you are eligible to sign up for Medicare. Any number of brokers can assist you with proper health coverage planning as you consider your retirement timeline.
5. Develop A Timeline For Claiming Social Security
Your Social Security distribution varies in comparison to your age when you sign up. If you start your benefits before reaching full retirement age, around 66 for those who will be retiring this year, then your payments are decreased.
You can enhance your Social Security payments if you suspend your claims beyond the full retirement age until you turn 70. Your distribution accumulates by eight percent for every year that you wait, which can help pad your retirement budget if you are in good health and expect to enjoy a long and active retirement.
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