Considerations When Making Plans for Retirement

For seniors at or nearing retirement age, making plans for the next phase of their lives can be both exciting and anxiety inducing. Planning for the basics — Social Security, Medicare, life insurance and retirement savings — can lessen the anxiety associated with retirement. The good news is that many of the basic steps can be completed online. However, specific questions should be referred to a specialist such as a tax attorney or a certified public accountant (CPA).

Applying for Social Security

Eligible individuals may apply for Social Security benefits beginning at age 61 and 8 months. A large proportion of individuals will be able to initiate their applications online through the Social Security website. If an individual applying for Social Security is within three months of turning 65 and has not already begun receiving Medicare, it’s possible to apply for Medicare at the same time as applying for Social Security. The earliest age to begin receiving benefits is age 62. However, full retirement age ranges between 66 and 67, depending on when an individual was born. The maximum age to begin collecting Social Security benefits is age 70.

Registering for Medicare

Most Americans nearing or over the age of 65, along with disabled individuals and people suffering from End Stage Renal Disease (ESRD), are eligible to register for Medicare Part A (hospital insurance) and Part B (medical insurance). Individuals receiving benefits from the Railroad Retirement Board (RRB) will be enrolled in Medicare Parts A and B automatically. All others either must register within three months before or after their 65^th birthday or during designated open enrollment periods. Waiting to register for Medicare after first becoming eligible translates into benefit penalties and can mean delays in obtaining coverage.

While original Medicare covers a large proportion of medical expenses, it does not provide prescription drug coverage, routine dental care or vision screening. To obtain coverage for these vital areas, individuals must obtain additional coverage. Medicare Advantage plans, also known as Medicare Part C, are insurance plans administered by third party insurance providers that have been approved by Medicare to cover the cost of prescription drugs. Medicare Part C plans also often cover vision and dental care along with prescription drugs. On the other hand, Medicare Part D only covers the cost of prescription drugs.

Reconsidering Life Insurance

Many retirees are in a position to reduce their life insurance coverage because they no longer have children living at home or mortgages to pay. However, life insurance is still a good investment for covering final expenses or to support a spouse who would be faced with drastically reduced income if the other spouse passes away. It may also make sense to hold on to a life insurance policy obtained earlier in life, because it can be difficult for people over age 55 or 60 to be approved for life insurance policies, even if they are in good health.

Dealing with Retirement and Taxes

Retirement is also the time to begin collecting from Social Security, pension plans or Individual Retirement Plans (IRAs). The transition from work to collecting retirement benefits often also means changes in income tax status. One specific area that should be discussed with a Tax Attorney or a CPA is the Setting Every Community Up for Retirement Enhancement (SECURE) Act that went into effect in January 2020. Under the SECURE Act, people who are still working can save up to $7,000, even after age 70, and retirees who reach age 70 after 2019 can wait until age 72 to begin making required minimum withdrawals (RMW).

Enjoying Your Retirement

Planning for retirement requires considering a number of areas — including healthcare and retirement income. Some arrangements can be made online, such as applying for Social Security and Medicare while others require professional advice. It’s smart to begin putting plans together before reaching retirement age. Putting the pieces for healthcare, finances and other important factors into place sooner rather than later can help ensure a great retirement.