Take this Are You Ready To Retire Quiz to find out. We update the quiz regularly and it’s the most accurate among the other quizzes.
Make a retirement budget and an income strategy for your retirement.
Consider your budget in both the short and long term as you approach retirement. In the short term, you’ll receive your final paycheck, which may include back pay, vacation/sick days, commissions, or a bonus.
You may also experience a lag between your last salary and the start of your retirement income. “If you anticipate you’ll have that gap,” says Heather Winston, associate director of advice and planning at Principal®, “consider increasing your savings in the weeks and months before you leave your work.” “If you’re still short on cash, you might dip into your emergency fund rather than using credit cards to cover day-to-day needs.”
Your retirement income strategy may include two streams when you retire:
- Income sources that are guaranteed
- If you are currently receiving Social Security benefits,
- Retirement Benefits (traditionally defined benefit plan)
- Annuities
- Assets for retirement planning (more on the first two below)
- Individual retirement accounts (IRAs) and retirement plans (401(k), 403(b), and employee stock ownership plans (ESOPs))
- Individual savings (CDs, bank, and money market accounts)
- Investing (stocks, bonds, mutual funds, real estate)
- Retirement earnings (example: part-time job)
Examine benefit expiration dates.
Some benefits may cease the day you leave employment, while others may be extended for a set number of days. “Those perks aren’t as common as they used to be,” Winston says. Also, you must try to play this Are You Ready To Retire Quiz.
Are You Ready To Retire Quiz
This list can assist you in your retirement transition:
Upcoming checkups: If you have dental or vision insurance today but will no longer have it after you retire, make appointments before your last day to ensure that your expenses are covered.
Life insurance extension: To begin the process of converting a voluntary life insurance policy (one purchased or given by your employer), contact your benefits administrator. The distinction is that you will pay the premium directly to the insurance company rather than having it deducted from your paycheck.
More on health insurance and retirement in the sections that follow.
In retirement, consider your health insurance options.
Make this a key priority when you plan to retire so that you don’t go uninsured. Your possibilities are determined by your age.
If you are under the age of 65, you have the option of obtaining retiree medical care through your job.
The insurance coverage of a spouse/partner (typically, you must sign up within 30 days of your employment termination date).
COBRA coverage allows you to keep your health insurance for up to 18 months after losing your job-based coverage. COBRA might be expensive because you must pay the full premium (rather than your employer covering part of the cost). If you had dental and/or vision insurance via your previous work, that is also covered by COBRA. If you reach the age of 65 during those 18 months, you must apply for Medicare.
- A plan from the Health Insurance Marketplace. The availability varies by state and is determined by your household income. Learn more at healthcare.gov.
- If you are a retired veteran, you have the following options:
- You may be eligible for benefits from the Veterans Benefits Administration.
- If you are 65 or older, you have the following options:
- Medicare coverage is available. When you sign up for Medicare through Social Security, you will have alternatives such as a prescription medication plan and Medicare supplementary coverage. (While you do not have to take Social Security to receive full Medicare benefits, you must contact Social Security to join up.)
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Choose your pension, if one is available.
If your current or past employers provided a typical pension (also known as a defined benefit plan), you may be required to specify how it will be paid. Inquire with your human resources contact to see if you are eligible for this benefit.
Make a decision about what to do with your retirement funds.
“Weigh the benefits and drawbacks of your options to choose what is best for you.” “Consider the costs, the tax ramifications, and when you’ll need to withdraw money,” Winston advises. In general, you have a choice between two options:
Transfer your 401(k) savings to an IRA.
This is known as consolidation, and it has the advantage of simplifying things by putting all of your accounts in one location. While you cannot contribute to a 401(k) after retirement, if you have earned income, you can continue to contribute to an IRA, which may have more investing alternatives. Find out how to set up a rollover IRA.
Keep your money in its current location.
If you retire or lose your employment at the age of 55 or older and keep your 401(k) with your previous employer, you can take penalty-free withdrawals between the ages of 55 and 59 1/2. (This only applies to the 401(k) from your previous job.) This is referred to as the IRS Rule of 55. Your employer will have payout policies in place, such as limiting withdrawals to quarterly or annual intervals.
Withdrawing the entire amount is also a choice, although it is unlikely to be your best one. If you withdraw all funds from your retirement plan, you may face immediate tax consequences and penalties, depending on your age and the type of retirement plan you have. Savings also lose the possibility for growth.
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