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The final years of retirement are filled with excitement and anticipation, much like the last lap of a race. However, during such a crucial time, you have to be careful to achieve your retirement goals in their entirety. Keeping your eyes on the plan can prevent the anticipation and excitement from distracting you from finishing the final steps and avoid unpleasant, unplanned surprises.
1. Understanding Your Numbers
A retirement budget should be determined well before retirement, and estimating your cash flow beforehand is best. The sooner this is completed, the better. Plus, if you can make a practice run a few years ahead, you will be in great shape to submit your paperwork. This practice is done by calculating your expected retirement income and living off it for a year. Then, you can place extra cash into a savings account and see how long you make it through the test run without needing to make a withdrawal.
2. Maintaining Cash on Hand During Your Transition Period
The Office of Personnel Management, or OPM, may need anywhere between 2 to 9 months to process your retirement application. In some cases, it may take less or more time than expected. Throughout this period, you will receive retirement checks worth a portion of your full check. Keeping cash on hand during your interim period can cover projected expenses during an uncertain timeframe such as this. Work to avoid withdrawing money from your investments to meet the costs and spend the least amount possible.
3. Calculating Medicare Timelines and Final Decisions
Retiring individuals 65 years or older have an 8-month window to pick up Medicare Part B free from penalty. Put time into researching this topic throughout your final year before retirement. Many health insurance companies reimburse Medicare B Premiums, making it worth the time to explore your options. You may also create a rough estimate of the amount you’d be responsible for covering in terms of Medicare Part B premiums. Because it is based on your income, it may be more important to understand if you will enter a higher bracket. This difference may equal several hundred dollars more a month in premiums alone.
4. Planning for Taxes
Many retirees are caught unawares come tax time. The transition period between becoming a retiree and a full-fledged employee involves switching to a different mindset regarding taxes. Those who haven’t considered speaking with a tax advisor may benefit from doing so now. Financial professionals can help to calculate and explain your financial situation to prevent any big financial surprises come April.
5. Pick a Retirement Date Depending on Sick Leave
Because of the many strategies involved in picking the most attractive retirement date, it’s crucial to understand your pension accruement from month to month. Many advisors argue that the best retirement date begins as close to the end of a month. By doing so, you can successfully account for accrued sick leave and other benefits. Your annual leave will be paid out in a lump sum, whereas sick leave is converted to years/months of services, thereby increasing your service time upon retirement. Take a look at the 2087 chart before setting the final date if you’d like to utilize as much sick leave as possible.
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected]