Many people in the US are considering retiring early due to the economic crisis. The pandemic could cause many people to have fewer savings for retirement. It’s important to review your retirement plans at any point in time. Regardless of your current financial situation, the same principles apply to planning for your retirement. These include: planning for unexpected expenses, keeping an eye on your savings, and making conservative decisions with Social Security.
Here are tips that will help you improve your retirement planning. Some may sound familiar, while others are new. Getting started is the best way to ensure you have the necessary resources to retire successfully.
- Start Early
It’s common knowledge that many workers are forced to retire early. According to a survey conducted in 2019, almost half of retirees leave the workforce before their scheduled retirement age. According to Desmond Henry, a financial planner based in Topeka, Kansas, the Covid-19 pandemic has accelerated this trend.
According to Henry, some people are forced to retire early due to the economic crisis or the fear of getting sick. Others are not comfortable returning to their jobs. Regardless of the reason, the timing of this trend is earlier than most people had expected.
It’s essential for workers in their 50s and 60s to start planning for their retirement. Although it’s not a sure thing that they’ll retire simultaneously, a recovery in 2021 could make jobs more available and layoffs less frequent. This is why it’s crucial to establish a contingency plan.
2. Deal With Your Debt
If you plan on retiring in the next 12 months, you must eliminate all of your debts, including student loans, credit cards, and mortgages.
The number of people in their 60s and 70s with student loans, credit cards, and mortgages has increased significantly. It can be very challenging to pay these debts off when you have a fixed income, so it’s vital to put in the extra hours to make the payments.
3. Make a Health Insurance Strategy
You are allowed to sign up for Medicare at age 65. To avoid penalties, make sure you have a plan before your birthday. This will let the coverage start earlier.
In addition to Medicare enrollment, it’s also essential to establish a comprehensive retirement healthcare strategy. According to Fidelity, a couple retiring in the US will spend around $300,000 on various medical expenses during their golden years. This includes co-pays and premium increases.
If you are forced to retire before you reach 65, you will still need to find health insurance. You will also need to decide if you can get a bridge from your old employer to Medicare or if you can get health coverage through the Affordable Care Act.
4. Increase HSA Contributions
One way to pay for these expenses later in life is by setting aside a large nest egg in a health savings account. This account can grow tax-free for up to twenty or thirty years. If you start contributing to an HSA this year, you could potentially have a massive pot of emergency cash.
According to Liz Weston, a certified financial planner, health savings accounts offer a variety of benefits. These include tax-free withdrawals, the ability to grow tax-deductible, and the ability to use the money for qualified medical expenses. Many companies also contribute to these accounts as an incentive to encourage their workers to sign up.
Although health savings accounts are generally associated with high-deductible health plans, they can be a good choice for healthy people with little healthcare expenses.