Retirement Conversation

Ahh- those long-awaited words, “I’m about to retire!” does this conjure up visions of lying on the beach with an exotic drink, relaxing, and living your life in peace and tranquility?

After all, you have worked for at least 30 years and look forward to retirement as a reward for all that hard work!

Well, snap out of it! After a conversation with my millennial daughter, here are at least 6 things I found that she didn’t know about retiring. Millennials and others should consider the following:

Required Minimum

Distributions can seriously raise your costs.

If you have been diligent enough to save in a 401(K) or a 403(b) plan each year, by law, you are required to begin withdrawing from those accounts once you turn age 70½.

Withdrawals from these account types are treated as taxable income, which means you’ll owe income tax on the amount distributed. This increase in your taxable income may expose your Social Security benefits as well.

Note that your Medicare Part B premium also rises along with your income. If your income is high enough, Part B can cost you as much as $428.60 per month.

Medicare Premiums can Eat Up Your Social Security Increase

Medicare Part B premiums can eat up all your Social Security yearly increases that are meant to keep pace with inflation. Just know that there is a “hold harmless” provision that prevents the Medicare Part B hikes from chewing through the increase in your Social Security check.

It Gets Sustainably Harder to Wait out a Bad Market Once You Retire

if you have a portfolio and need to pull down money to cover your costs of living, a market slump may leave you no choice but to sell at a low point and rapidly deplete your retirement assets. Structure your finance so that you have at least a five-year buffer of bonds and cash to see you through bad spells.

You Could Finish Retirement with A Larger Nest Egg Than You Had When You Started it

A common guideline for retirement spending is known as the 4% rule. This rule indicates that in a diversified stock and bond portfolio you can spend 4% of the initial value of your nest egg in the first year of your retirement and then increase your withdrawals annually based on inflation. Following that strategy, over the course of a 30-year retirement, you will be very unlikely to run out of money.

Other Than Health-Related Costs, Your Expenses May Actually Go Down in Retirement

what you need to realize is that spending usually decreases with a person aged 55 or older because they have paid off mortgages, adult children are self-sufficient, you enjoy various tax benefits like a larger standard deduction, greater medical-expense deductions, and freedom from Social Security and Medicare payroll tax. Older retirees tend to stay put more and spend less. Just remember to plan out retirement, because you’ll want to be able to spend more while you’re young enough to enjoy that spending to the fullest. 

You’ll Still Have 24 Hours in A Day And Seven Days in Your Week

when your leave the workplace, you lose the regular socialization that goes with it, along with the daily mental and physical activity. The deaths of aging friends and family members are also a contributing factor. The happiest retirees find meaningful ways to fill their days. Caring for family members, charitable volunteer work, or even a low-stress job can keep them active with purpose, stimulation, and social support.