As a financial planner in Tennessee, it’s safe to say, that most working adults, at some point, plan to retire. However, that doesn’t mean that they’ll retire the same way.
Retirement planning (Tennessee) is one of our specialties at TrustCore, and in our experience, no two retirements are exactly the same.
Didn’t know you had options?
Whether it’s a financial decision, an emotional decision or a little of both, at TrustCore, we see 3 common ways people decide to transition into this next phase of life.
What are your plans for retirement? Contact TrustCore and get the conversation started.
A phased retirement allows you to gradually reduce the hours of your existing work schedule to slowly transition into life with no work at all. Continuing to work in some form can allow you to reap the benefits of having a job, like healthcare coverage and a steady paycheck, yet cut your hours enough to give you a sneak peak of what a full retirement will look like.
If you have a good relationship with your employer, they may work with you to devise a schedule, and even come up with a unique compensation package to preserve your benefits. This method can be a great approach for individuals who are looking to ramp down and ease into retirement, instead of experiencing a hard stop.
Here’s what a phased retirement means for your healthcare and investments.
Healthcare
One of the biggest perks to staying in the workforce is benefits. If you decide to go with a phased approach, there’s a good chance you can maintain your income and healthcare benefits for a little longer. Depending on your healthcare needs, the cost savings can be substantial, earning more years of a comfortable retirement from the additional savings.
Investments
This approach can also bode well for your investments. Of course, the ability to maintain a reasonably stable salary gives you the chance to put more away in savings, and add new money and potentially more investment growth. If you receive retirement benefits like a 401(k) or 403(b), you can also put away more tax-advantaged money, even receiving a company match (if applicable) while doing so.
Social Security
The phased method offers a double-whammy of sorts to your future Social Security benefits. Since you’re working, you are generating income, thereby delaying your need to receive Social Security benefits (and the longer you delay receiving these benefits, the more you’ll receive on a monthly basis until you reach age 70). Also, depending on your income history, you may be able to increase the amount you receive.
A changed approach to retirement allows you continue working while also quitting your job. How’s that? Many retirees switch roles and start consulting, freelancing or contracting work. Working in any of these capacities can grant you more control of your schedule and potential income.
The added freedom plus ability to generate income can offer a high quality of life in contrast to the required 40-hour workweek of a full-time employee. But this additional freedom comes with a few extra costs.
Healthcare
As a consultant or freelancer, it’s almost a given that you’ll need to obtain healthcare benefits on your own, outside of your employer. This means you’ll need to add healthcare costs to your budget, which can be expensive. On average, monthly premiums for individuals over the age of 60 is about $500, and this number jumps to $600 a month if you’re over age 64. If you are looking to use a changed approach for retirement, it’s crucial that you account for your healthcare coverage.
Investments
As an investor, a changed approach to retirement can make adding new money to your portfolio a little tricky. While you may be generating income on an independent level, there’s a chance that your monthly income will vary sporadically. This can make it difficult to follow a consistent budget as your cashflow may change from month to month. Watch your inflows and outflows closely to make sure that you are still saving and adding new money to your investment accounts.
A changed approach will also likely make you ineligible for an employer-sponsored retirement plan.
Work with a financial planner to make sure you capitalize on any new opportunities available to you.
Social Security
Bringing home a paycheck can affect your Social Security benefits, if you chose to start receiving them. Talk to a financial planner about the tax implications and what working will do to your bottom line.
Retiring full-force means retiring completely. The trick to a full-force approach is being able to meet your desired retirement date and adjust to the life you had envisioned. Can you afford it? Did COVID-19 affect your plans? Make sure to review your plan with your financial planner to make sure you haven’t overlooked anything.
Healthcare
Healthcare is among the biggest expenses for many retirees. According to a Forbes report, a 65-year-old couple in good health can expect to pay nearly $400,000 (or $193,822 for a single person) in healthcare costs in retirement. Medicare does become available once you turn 65, significantly reducing the costs of your care, co-pays and certain prescription drugs.
Investments
Retirement lasts 18 years, on average, so it’s important to determine a reasonable spending amount that supports your lifestyle without depleting your assets too soon. This is one of the many times your financial planner can shine, helping you manage your investments to support your lifestyle.
Social Security
Talk to a financial planner to ensure that you make the most of your Social Security benefits. Just because you’ve stopped working doesn’t mean you necessarily have to start taking these benefits.
Whether you think it’s better to slowly ease into retirement, or you’d rather end work with a hard stop, the key is planning appropriately. Retirement planning in Tennessee involves many factors. Will you relocate? What are your plans?
Schedule a no-obligation conversation with the TrustCore team, and get the conversation started.
Important Information and Disclosures
Readers are encouraged to conduct their own independent research. This information is intended to be limited in scope and provide basic educational information on presented topics. Data represented is believed to be from reliable sources.
TrustCore makes no warranty concerning such information. TrustCore expressly disclaims all representations and warranties that: (a) the content is correct, accurate, complete, or reliable; (b) any of the information will remain available for any amount of time or in any medium; and (c) that any omission or error will be corrected. The information contained in this presentation should not be considered a solicitation, offer, or recommendation for the purchase or sale of any securities, other financial products, or services and should not be regarded as a description of services offered by TrustCore. TrustCore shall not be held responsible or liable for any damages or losses, whether direct, indirect, incidental, special, consequential, or exemplary, that arise or result from the use of such information.
The information contained herein is presented with the understanding that the individual authors, presenters or organizers are not rendering financial, legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly assume no liability whatsoever in connection with its use. The foregoing information should not be regarded as offering a complete analysis or opinion on any provision of local, state or federal law. You should not attempt to implement any of the planning strategies set forth in this content without first obtaining competent, professional advice from a qualified individual or firm.