Understanding financial planning during the retirement years

Here are some ideas to help make sure you’re ready for retirement, starting at age 60.

In our retirement years, we must be well prepared. We no longer have a job and now live on a fixed income. This applies whether you put money in monthly or withdraw money in a lump sum into an investment account.

At age 70½, the government begins requiring mandatory distributions from all tax-deferred retirement accounts, like 401(k)s or IRAs. There are penalties for not withdrawing the money, even if we don’t feel like we need to use it. Our custodians can tell us how much is required to withdraw each year.

We should invest our retirement money in conservative and somewhat stable vehicles. This is the only way to guarantee that money lasts as long as we do. This does not mean that we shift all of our money into money markets, certificates of deposit, or bonds. The growth those vehicles offer will not be enough to keep up with inflation, and we will most likely outlive our money.

However, we need to understand, based on the growth of the funds in the account, how much we can regularly withdraw without depleting the account too soon.

The best way to curb any potential mistakes is to create a budget. Many people see budgeting as a bad thing, but a budget is the key to maximizing your income.

This is also a good time to review all insurance to make sure we are covered in all areas.

Before we retire, we need to find out what kind of health coverage we will have when our employment ends. Some employers offer comprehensive health coverage after an employee has worked a certain number of years. Some people retire just before the time they need to get full retirement medical benefits.

If our employer’s plan doesn’t offer full coverage, we need to figure out what we need to do to get supplemental coverage.

Now is also the time to look into long-term care insurance. There is a high possibility of needing long-term care at some point in our lives. As health care costs continue to rise, the out-of-pocket cost of long-term care can greatly reduce the retirement savings we may have accumulated.

There are several options available in a long-term care insurance policy. We must review the options and choose what works best for our family.

We must also update all estate planning documents. These include our living trust, advance health care directives, and power of attorney.

Someone should be assigned to take care of our affairs in case we are unable to do so. If we do not address this critical issue, the courts may assign someone to do it for us.

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