Rethinking Retirement in a Post-Pandemic World

group of retirees enjoying meal and friendship while sitting at table

Retirees are tending to focus on overall well-being, as the pandemic put life into perspective for everyone

Many Americans are rethinking retirement as a result of the global pandemic. Retirees are tending to focus on overall well-being, as the pandemic put life into perspective for everyone. It has heightened concerns about retirement security, leading people to consider working longer. On the other hand, the pandemic sparked many people wanting to retire earlier.

Whether you’re nearing retirement or are in retirement, consider these questions and options for retirement in a post-pandemic world.

How you want to live in retirement? Can you afford it?

The choice is entirely yours, but consider your lifestyle in retirement before making financial decisions. Think about where you imagine living, if you plan to travel, or want to spend more time and money on hobbies. The cost of your retirement depends on your goals, which determines when you can retire. If you know how much you currently have saved for retirement, view your estimated monthly income with our handy calculator.

You’ll need to estimate your basic annual expenses in retirement, such as healthcare, housing, and food. It can be helpful to evaluate your budget and create a list of your annual expenses. If you’re planning to make a big purchase like a boat or vacation, factor in the costs associated with your purchase. For instance, if you’re purchasing a boat, calculate boat registration fees, tax payments, licensing, boat insurance, and maintenance costs. Being well-informed of all costs can help you avoid draining your savings. Before making a large purchase, be sure your emergency fund has enough money to cover three to six months’ worth of living expenses.

Pay off and avoid debt

Your retirement income is reduced by every dollar you owe in debt. Whether it’s credit cards, car payments, or if you’re questioning paying off your mortgage, be sure to evaluate your debts. List the balances of any debt, minimum monthly payments, and the interest rate you’re paying.

It’s best to start paying down high-interest rate debt, to help cut the amount you’re paying in interest. Once your debt repayment is less than your investment returns, consider a mix of debt repayment and investing.

Consider delaying social security benefits. Waiting until 70-years-old can be very beneficial.

In some households, delaying Social Security benefits until age 70 can be financially beneficial for the highest earner. Waiting until 70-years-old to take Social Security is when the payout will be the highest.

Many people claim Social Security earlier, often almost immediately after retirement. However, when you retire isn’t dependent on when you take Social Security. In fact, you may be able to utilize tax planning in your early sixty’s before receiving Social Security benefits.

Consider other sources of income

If your retirement savings aren’t quite where you’d like, consider creating a new income stream. In addition to investment assets, there are other ways to increase your income, such as rental properties, small businesses, part-time jobs, and side-hustles. You can save more towards your end goal when you have alternate income streams to cover daily living expenses. Before starting a new endeavor, be sure to calculate the costs of doing business, and how much of a return you’d earn.

Review your asset allocation with your financial advisor- Do you need to adjust your portfolio to generate more income?

Asset allocation is the ratio between the stocks and bonds in which you’re invested, and is an important component of a good long-term investment strategy. The proper asset allocation depends on your portfolio. If you’re not taking pension, Social Security, or annuities – or if these don’t cover your monthly living expenses – you need liquid cash to pay essential bills.

When it comes to reviewing your asset allocation or adjusting your portfolio, talk to a financial advisor. Your trusted advisor should take into account the bigger picture of your finances, while factoring in your level of comfort with risk and long-term goals.

What about healthcare? Are you prepared to cover the costs, do you qualify for Medicare?

The costs of healthcare are a major concern when considering early retirement. Healthcare costs are expected to grow more than housing and transportation costs, making it vital to include healthcare when planning your retirement.

Around the age of 65 is a good time to review your Medicare options. When you turn 65, you will have a seven month initial enrollment period. This begins three months prior before your sixty-fifth birthday. It’s important to understand Medicare Parts A, B, and D, as well as Medicare Advantage and Medicare supplementary insurance plans.

    • Part A

      - Hospital costs are covered by Part A after you reach your deductible.
    • Part B

      - Medical expenses are covered by Part B, which requires an annual premium.
    • Part D

      - Prescription drugs are covered under Part D.
    • Medicare Advantage

      - Advantage plans provide all of the services covered by Medicare Parts A and B in one plan. Other services may also be covered that are not covered by parts A and parts B, including prescription drugs covered under Part D.
    • Supplemental Policies

      - Private insurance companies provide coverage to supplement the expenses Medicare Parts A and B typically do not cover.

When it comes to retirement, many factors can change the outcome of when you retire. Asking yourself these questions and considering these tips will help you better prepare for your retirement. If you have any questions regarding your retirement, contact one of our financial advisors. We would be happy to assist you!

Sources:

8 Tips towards achieving early retirement, John Hancock

Four Ways Covid-19 Has Changed Retirement, Forbes

How to plan for rising health care costs, Fidelity

It’s the new year- here are 5 things to consider when reviewing your investment portfolio, Onebiteblog

When Can You Afford to Retire? Ask Yourself These 4 Questions, The Motley Fool

Investing involves risk including the potential loss of principal. No investment strategy, including diversification, asset allocation and rebalancing, can guarantee a profit or protect against a loss. This material is intended for informational purposes only and is not intended to be a substitute for specific individualized investment planning advice.