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How to Retire in 2021

How to Retire in 2021

Originally aired 1/20/2021

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Looking to retire in 2021? We’re talking all about what you need to know before you do on this episode of the Get Ready For The Future Show! 

You’ll Learn:

  • Why 2021 is the year Social Security changes forever 😳
  • Other details you should have in order before you officially clock out
  • What strategy equates to gambling with your future

Downloadable Content: Click Here to Download Your FREE Retire 2021 Checklist

Links: Get Your Free 15 Minute Retirement Checkup Here

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SHOW NOTES

Retire 2021

  • Retirement is a major life milestone, and the general transition can be mentally and emotionally taxing.
    • Your routine will be different:
      • You don’t have 8+ hours spent in the office each day
    • Your finances change:
      • Accumulation to decumulation
  • Today, we’re going to walk you through a few things you need to have in order before you step into retirement this year.
  • Social Security:
    • Have you decided when to take Social Security in order to maximize your benefit?
      • If you have a plan, the answer is probably yes.
      • If you don’t, do you know when you need to file?
    • 2021 is the year that Social Security changes forever.
      • We discussed this a little on last week’s show – it was packed with information you don’t want to miss.
      • Full retirement age (FRA) is going up
        • It used to be 66
        • It’s climbing now by 2-month increments until it reaches 67 (based on your birth year)
          • 1943-1954: FRA was 66
          • 1955: FRA will be 66 and 2 months
          • 1956: FRA will be 66 and 4 months
          • And so on until we reach FRA of 67
      • What impact does this really have?
        • You can file for Social Security as early as 62
          • With FRA at 66, you would receive 75% of your benefit
          • As FRA climbs, you will only receive 70% of your benefit
        • If you delay until 70
          • With FRA at 66, you would have been able to receive 132% of your benefit
          • As FRA climbs, you will only receive 124% of your benefit
  • Wondering whether you’re on track for retirement? Get your free retirement checkup at 15minuteretirement.com.

Healthcare and Work Benefits

  • Sign up for Medicare or Other Health Insurance
    • Regardless of your Social Security full retirement age, you are eligible for Medicare at age 65.
    • When you enroll in the program you will need to make decisions about Medicare supplement plans and prescription drug coverage or Medicare Advantage plans.
    • If you’re retiring before age 65, you have to figure out how to get medical insurance that isn’t connected to your job.
  • Check your Retirement Benefits
    • Confirm eligibility for a pension or other retirement benefits you earned at work.
    • Also, check to see if you qualify for benefits from a previous employer.
      • You might collect income from two or three places where you worked during your career.
    • Find out if you’re eligible for retiree employer-subsidized health insurance.
    • Check to see if retirees can take advantage of any other company-sponsored benefits, from life insurance to membership in a health club to employee discounts on company products.
  • Take Advantage of Last-Minute Benefits at Work
    • If you have dental and vision coverage at work, you may want to visit the dentist and pick up a new pair of glasses before you retire.
    • If the company matches any charitable giving, then make your annual contributions before you retire.
    • If your child has an employer-sponsored college scholarship, see if the scholarship will continue after you leave.
      • If you are Social Security age and have minors at home, they can receive benefits as well (that don’t decrease yours).
    • This is your last chance to use the benefits the company offers.
  • Get your Retire 2021 Checklist now! Download here. 

Review Your Accounts

  • Consider Rolling Over Your 401k to an IRA
    • Employers typically allow you to keep your 401(k) account with the company after you retire.
      • However, you might be better off transferring the money to an IRA or Roth IRA.
      • IRAs typically have more investment options, and you can shop around for lower-cost or better-performing funds.
    • If you own company stock, either inside or outside a retirement plan, now may be the time to sell some to diversify your holdings. You may also want to tweak your investment strategy and make a plan to minimize taxes as you draw down your retirement assets.
      • Rolling over your 401(k) money into an IRA can be a good way to defer taxes until you retire and begin to take distributions.
      • But if your account includes publicly traded stock in the company you work for, you can save money by withdrawing it from your 401(k) and putting it in a taxable brokerage account, for more favorable tax treatment.
      • The difference between the stock’s value when acquired and its current value, known as its net unrealized appreciation (NUA), is then subject only to capital gains tax, rather than the more costly income tax.
      • The only part of your company stock that is subject to ordinary income taxes is the value of the stock when it was first bought by the 401(k) plan.
  • What’s an in-service distribution? Can I still keep my 401k if I do so?
    • Quite simply, it is a distribution that a participant takes from a retirement plan while still employed.
    • There are restrictions to this, generally based on age and service.
    • You are subject to a 10% early withdrawal penalty if you take an in-service withdrawal before 59½.
    • When it comes to in-service withdrawals, you have 4 options:
      • Keep the money in the plan (not required to take it out at 59½)
      • Cash out (in most cases don’t recommend)
      • Rollover to IRA accounts and begin retirement income planning process
    • You can keep your 401k and continue to contribute on your next paycheck following the in-service withdrawals.
  • Review Your Plan with Your Advisor
    • We’re all aware that circumstances, retirement timelines, markets, and goals change over time.
      • That’s why your financial plan should evolve as you do.
    • If you’re nearing retirement – especially if you’re hoping to retire this year – you need to set a time to meet with your advisor and discuss details.
      • We don’t expect you to know or keep track of all the ins and outs of retirement planning. That’s our job.
      • Your job is to dream, to decide what you want your future to look like, and trust a team to help you work toward that.
    • You’re likely to spend 20-30 years in retirement. Don’t you think it’s worth a 30-minute (more or less) conversation with your advisor to see if you’re on track to the retirement you want?

Hope Isn’t a Plan…

  • Hope is not a plan.
    • If you’re considering retiring without a plan, all you have is what you’re doing now and a hope that it all works out.
    • Question: Is that enough to bet your future on?
      • Answer: it shouldn’t be.
    • Many people just hope everything will work out in retirement. Sometimes it does, but sometimes a lack of planning can ruin what should be your best years.
  • With a plan, the outcome is income.
    • Money stashed away isn’t enough.
      • Having money is not the same as knowing how to use it. That means a plan is not a secret stash of cash that you don’t touch.
        • Even if you never touch it, that money won’t be worth tomorrow what it was yesterday.
      • A plan also doesn’t hang on a single ideal number or dictate to you what you should do or want or be. The whole point of a plan is to give you options.
    • Investments alone aren’t enough.
      • We’ve had plenty of people walk through our door believing they have a financial plan, but really all they have is a handful of investments an advisor sold them long ago.
      • Again, the outcome is income.
      • If you don’t have a plan, you’ll likely reach retirement with a bit of hesitancy over using the money you’ve worked hard to accumulate.
        • Don’t clock out for the last time, look at your investments, and say now what?
        • Your plan should account for the “what ifs.”
  • The goal of a plan is to keep your money working, long after you stop.
  • Even if you’ve never planned for retirement until this point, it can still do you some good.
    • Do you know how long your investments and retirement savings will last?
    • Can you sustain your income without a job?

FINAL THOUGHTS

    • If you’re planning to retire in 2021, there a lot of factors to consider and get in order before you do so:
      • Social Security
      • Medicare / Health Insurance
      • Check Your Retirement Benefits
      • Take Advantage of Last-Minute Benefits at Work
      • Consider a 401k Rollover
      • Review Your Plan with an Advisor
      • Don’t Gamble Your Future on Hope
  •  
    • Get your Retire 2021 Checklist now! 
      • Download here
  •  
    • If you aren’t quite ready to retire this year but it’s in your near future, do you know if you’re on track?
      • Visit 15minuteretirement.com to get a free retirement checkup now.
      • It’s totally free to you, and you can do it in the time it takes to check your social media.