20 May 2018

Retirement Milestones to Look Forward To

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Retirement is a transition into a new stage of life. Retirees get the freedom to choose how to spend their time, but they also walk away from the comfort of a steady paycheck and need to make important financial decisions. Here are some retirement rites of passage.

Reaching financial freedom. You have achieved financial freedom when you no longer need to work to pay your bills for the rest of your life. Once you reach that inflection point, you can leave this job or negotiate part-time work, and you know things are going to be OK.

Having the retirement conversation with your boss. There’s a certain satisfaction that comes from being able to tell your boss that you’re simply not going to come into work anymore. But other people find they miss some aspects of the job, especially the social life they had in the office. The transition is often easier if you have hobbies or travel plans to look forward to.

Shutting down your work computer. There will come a moment after your stuff is packed when you walk out of your office for the last time. You get to escape from boring meetings and tight deadlines, but you also won’t get another invite to a business lunch or holiday party.

The first time someone asks, “What do you do?” Most people answer this question with their profession, but retirees need to think of a new answer. You may want to talk about your volunteer position or an important hobby, or have a quip ready about how you finally get to do whatever you want every day.

Taking withdrawals from your retirement accounts. After decades of saving for retirement, retirees finally get to spend some of that money. But you also need to worry about making your savings last for the rest of your life. Once you turn 59½, there’s no longer a 10 percent early withdrawal penalty to take money out of your retirement accounts, but you will need to pay income tax on each withdrawal from traditional 401(k)s and individual retirement accounts. After you reach 70½, you will be required to take withdrawals from your retirement accounts each year. The penalty for missing a required minimum distribution is 50 percent of the amount that should have been withdrawn.

Collecting Social Security payments. Workers pay into Social Security throughout their entire career, and many retirees are eager to collect. However, the age you sign up for benefits drastically changes the monthly payment you receive. Although you can begin collecting benefits as early as age 62, monthly payments are reduced if you claim benefits before your full retirement age, which is 66 for most baby boomers and 67 for people born in 1960 or later.

Signing up for Medicare. Beginning three months before you turn 65, you can sign up for Medicare. It’s important to sign up for benefits in the seven-month window around your 65th birthday, because premiums are sometimes increased for beneficiaries who sign up later.

Realizing you don’t have to be anywhere. Retirees don’t have to get up early or report anywhere at a specific time. You’re free to linger over a second cup of coffee and take your time running errands. But you may find that you want to make an effort to get out of the house and be with other people.

Click here to access the full article on U.S. News.

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