 Saving for retirement is stressful for many Americans. This is especially true if, as you get closer to this huge life change, you slowly start to realize that you may not have enough saved to sustain you and your spouse or partner. This realization is enough to turn you upside down emotionally. As you get closer to retirement, and get more serious about making a financial plan, you may start to wonder how you can grow your retirement income and live the retirement lifestyle you’ve always imagined. Unfortunately, there’s no substitute for time. Saving and investing for as long as you can is the best way to ensure a well-padded retirement savings. However, there are a few things to do if you’re getting closer to retirement and are finding that you’re behind the ball when it comes to saving. Consider the Bucket StrategyThe bucket strategy is a method of retirement savings that requires you to save your money in “buckets.” Traditionally, this means dividing your current retirement savings into a few different buckets based on the number of years into retirement when you’ll need those funds. For example, you may have: Bucket One: 0-5 years Bucket Two: 5-10 years Bucket Three: 10-15 years And so on. These buckets will be allocated based on the risk tolerance you’ll have given the timeline in which you expect to need the income from each “bucket.” For example, with funds in Bucket #3, you may be able to take on riskier investments that have a potentially higher pay-out if you won’t need those funds for a longer period of time because they’ll have more time to balance should they take a hit in a down market. As you move through retirement, a financial planner can help you to develop a strategy to replenish each bucket and adjust their allocation accordingly. Work LongerOne way to maximize retirement income is to stay in the workforce for a longer period of time. If this is an option for you, you can accomplish a few different things:
Encore!If working at your current job for a longer period of time isn’t an option, or isn’t a desirable option, you might consider pursuing an encore career. This could be anything from teaching part time at a local community college based on your previous career and areas of expertise to freelance writing in your spare time. Earning an income during retirement, even if it’s not through a full-time job, can help to extend the life of your retirement savings, relieve stress around the lack of savings you’re currently worried about, and provide you with a meaningful way to spend your time - something many retirees forget to plan for. Ditch DebtWhen it’s possible, it’s wise to pay off all of your debt before you enter retirement. This includes your mortgage, if applicable. In some cases, you may look to sell your home and downsize if it looks like you may carry a hefty mortgage into your life as a retiree. The fewer liabilities you have, the more mileage you’ll get out of the savings you currently have and any additional streams of income you choose to pursue during retirement. There’s a very real possibility when you take debt into retirement that you’ll be unable to pay it off, or you’ll be forced to dedicate even more of your limited savings to payments. The last thing you want is to be restricted and unhappy during your years as a retiree, and you definitely don’t want to pass that debt on to your heirs in the event that you pass away. Catch UpIf you’re 50 years old (or older), check to see if you’re eligible to take advantage of catch-up contribution limits in your retirement savings account. If you’re currently enrolled in a plan through your employer, like a 401(k), you’ll be able to contribute $18,500 each year plus an additional “catch up” contribution of $6,000. If you’re enrolled in an IRA, you can typically contribute an additional $1,000 to your account on top of annual limits if you’re 50 years old or older. When you’re working to save more for retirement, or maximize your current savings, it can help to talk through your options with a financial planner. At Wisely Advised, we’re here to help you develop a strategy that’s ideal for your lifestyle and financial situation - even if you don’t feel like you have enough saved yet! Contact us today to set up an obligation-free consultation. Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
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 If you’re considering early retirement, you may be wondering what you’ll do for health insurance coverage in the years before you qualify for Medicare. You don’t want to be worried about how to cover medical costs when you leave your job - and you don’t want to get hit with a penalty for not being enrolled in healthcare, either. So, what do you do? COBRACOBRA allows you to use the same healthcare coverage that you had at your previous employer for up to 18 months after leaving your job. Keep in mind that, while this can be convenient to maintain your level of coverage, you lose any employer subsidy you had before - meaning you’re responsible for 100% of your premium. This can get pretty expensive for those who haven’t prepared for the additional cost of coverage one way or another. Retiree Health InsuranceAlthough this is rare, some employers offer health insurance programs specifically for retirees who don’t qualify for Medicare yet. If this benefit is available to you, double check to make sure you’re eligible, and check to see that the coverage offered through this program is comparable to what you were receiving while you were employed full-time. It may only cover your health insurance, not your spouse’s or other dependent’s - so make sure you read through the benefits carefully! Spouse’s Health InsuranceIf you and your spouse are retiring at different times, and they still have health insurance options through their employer, this is probably your best bet. Most employer-sponsored health plans are lower cost than anything you’ll find through private insurance or on the healthcare marketplace. Retiring, or quitting your previous job, qualifies as a life event that gives you eligibility to enroll your spouse’s plan. Note: you only have 30-60 days (depending on your health insurance provider) to enroll in your spouse’s health insurance after a qualifying life event. Don’t miss your window! Affordable Care Act Marketplace Health CoverageIf you don’t qualify for Medicare, aren’t able to join a spouse’s insurance plan, and still need to find an alternate solution - The ACA Marketplace might be an option to explore. Depending on your income, you may even qualify for subsidies that reduce the total cost of your coverage. Like most health care plans, the ACA categorizes their coverage into three levels: Gold, Silver, and Bronze. Remember that this isn’t always the same coverage as the insurance you held as a full-time employee, so make sure that the coverage level you select is right for you! When you’re researching ACA health care options, a few things to look for are:
Understanding what’s covered - and what’s not - can help you make an ideal decision for you and your family. Do Your ResearchMany times, when someone is looking to retire early, they panic about health care coverage. This sense of urgency pushes them to make a decision about insurance enrollment during the years before they qualify for Medicare - and they often don’t check all of the boxes when researching what the best option available is. COBRA, your spouse’s health insurance, retiree health care coverage, or the ACA marketplace are all valid options - but there are other, less well-known options available.
Health insurance is still technically mandatory by law for 2018. While this might change in the future, it’s still unwise to go an extended length of time without any form of health insurance. This decision has the potential to be fairly expensive, and you want to work to minimize your insurance costs while maximizing your coverage as you could face rising medical costs as you age throughout your retirement. One option is to speak with a financial planner about your health insurance needs. They can help you determine what coverage plan makes the most sense for your unique financial situation, and how to leverage your coverage over the course of your years as a retiree. Want to learn more? Contact Tony at Wisely Advised today! Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here. |
MEET TONY
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering comprehensive financial planning and investment advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends. Archives
November 2019
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