Retirement is a significant phase in life that many people look forward to. After working for most of your life, knowing retirement is just around the corner can be bittersweet but also exciting. You now have the opportunity and availability to do what you want. You can take up hobbies you’ve always wanted to try, travel, relax, and enjoy your time. The options are endless once you retire.
Although it’s great to think about everything you’ll be able to do once you retire, you still need to prepare for retirement. There are several things you’ll want to consider and think about before your retirement date comes up. In addition to the six tips below, you can also read about 5 Money-Savings Moves You Should Consider in Retirement to really set yourself up for success!
Plan for your Medicare enrollment
Your Medicare enrollment will be different depending on what age you are when you retire. If you retire before 65, you can enroll in Medicare as early as three months before your 65th birthday month. However, if you’re already receiving Social Security benefits at least four months before your 65th birthday, you will be automatically enrolled in Medicare and won’t have to complete an application.
Whenever you enroll during the three months before your birthday month, your benefits will begin on the 1st of your birthday month. However, if your birthday falls on the 1st, your benefits can start one month earlier.
Your enrollment will differ if you retire past 65 from a large employer. You will need to apply for Medicare and provide CMS form L564 which proves you had creditable insurance while you delayed Medicare past 65. You can request a specific effective date, but you will want to apply far in advance to give Social Security enough time to process your paperwork.
Learn about your insurance plan options
Before you retire and come off employer insurance, you’ll want to learn about your insurance options in the Medicare world. If you are not offered retiree insurance from your job, you can choose between two different types of plans.
The first option is a Medicare Supplement plan and pairing it with a Medicare Part D plan. A Supplement plan will be secondary to Original Medicare, and the Part D plan will help cover your drugs.
The second option is a Medicare Advantage plan, an alternative to Original Medicare. You would get your Medicare Part A, and Part B benefits from a private insurance carrier. They can also bundle your drug coverage.
Estimate your monthly costs
Your income will change significantly once you retire. Therefore, you’ll need to get an estimate of your monthly costs to budget and ensure you can afford everything you need. You’ll want to consider your mortgage, car payment, utilities, insurance, groceries, and more. This can take some time to figure out and budget, so getting started early is better.
Understand IRMAA and how it could affect your costs
One primary reason to prepare before retirement is because of IRMAA. IRMAA stands for Income Related Monthly Adjustment Amount. If your income from two years prior is above a certain amount, you will pay more for Medicare Parts B and D.
You can appeal IRMAA if your income has changed since two years before, so it’s not permanent. Social Security will also reevaluate this every year, but you’ll want to keep this in mind before you retire.
Determine when you want to receive Social Security benefits
You may have postponed Social Security benefits while you’ve worked past age 62. If so, you might be thinking about when you will want to start receiving them. Many people wait until their full retirement age to receive benefits, but you don’t have to. However, you may want to work with a financial advisor to determine when to begin taking Social Security benefits.
Consider working with an expert
Another expert you may want to consider working with is a Medicare broker. Medicare has many pitfalls, and if you make a mistake, it can be costly. You could get hit with lifelong penalties or even an IRS penalty if you don’t stop HSA contributions when you should. It might not be an easy transition for everyone, so consider working with a Medicare expert to have a smooth transition into retirement.
Get ready
Retirement is an exciting phase in life but requires preparation to set yourself up for success. You will want to prepare for this process so you can be ready to complete the necessities and start your retirement off right!