Retirement can be an exciting time for seniors. You have the opportunity to spend more time enjoying the fruits of your labor and pursuing activities that you’re passionate about. Being money smart will help you to live your retirement to the fullest.
Different strategies that can be useful for you include maximizing your Social Security benefits, getting a life insurance policy, and having a retirement plan. Here’s what people should know about how to be money smart in retirement.
Maximize Social Security benefits
Before you retire, en sure you earn as much as you can until or after you reach full retirement age. Your Social Security benefit amount is calculated based on your earnings, which means the more income you earn, the higher your benefit amount will be. It’s also helpful if you worked for 35 years or more, as that will help you get more money once your benefit amount is calculated. It can be a good idea to delay your Social Security benefits until after you reach full retirement age, as your benefit will increase by up to 8% each year until age 70.
Get a life insurance policy
Getting a l ife insurance policy can be a smart financial strategy to protect your family in the event of your passing. The death benefit from your life insurance can help them cover current and future expenses. Different policy types that you may consider include final expense life insurance for seniors, term life insurance, and guaranteed issue life insurance. Here’s a closer look at each policy:
- Final expense insurance: This is a permanent life policy that comes with a small death benefit. Loved ones can use the death benefit payout to cover burial costs, medical costs, and other end-of-life expenses. According to LIMRA, covering burial and final expenses is one of the top reasons people buy life insurance.
- Term life insurance: A term life policy is an option to pursue if you’re looking for a temporary policy with affordable rates. Policy term lengths typically range from 10 to 30 years. Be aware that this type of policy typically requires a medical exam.
- Guaranteed issue life insurance: This policy is a good option for seniors who want to skip the medical exam. With this policy option, you can receive guaranteed approval. Keep in mind that this policy may come with higher premiums and offer a lower amount of coverage.
Have a retirement spending plan
A retirement spending plan can help you avoid running out of your retirement money as you age. First, estimate what your yearly income and your expenses will be. One general guideline is to withdraw 4% of your total retirement account balance each year. As an example, if you have $1,500,000 in your 401(k), you would withdraw $60,000 in the first year of retirement. Be sure to adjust that amount for inflation in future years. Once you set an amount you’ll withdraw yearly, you’re better able to determine what you can afford to spend. Estimate all your essential expenses for the year and budget accordingly.
Live a healthy lifestyle
Medical expenses from a serious illness can quickly drain your retirement savings. Living a healthy lifestyle can give you the best chance of not getting critically ill. First, h ave regular check-ups with your doctor to make sure you’re in good health. Then, f ollow your doctor’s medical recommendations and practice good health habits such as eating healthy and exercising regularly.
The bottom line
Your retirement is an ideal time to be smart about your finances. You can maximize your money by waiting to claim your Social Security benefits. Increase financial protection for your loved ones by getting a life insurance policy, and create a retirement spending plan to stay within your budget. Finally, maintain a healthy lifestyle to help avoid extra medical costs. Following these tips can give you the best chance of being money smart in your retirement.