Are you entering the homestretch of your career? For many people, the final 10 years before retirement are filled with a mix of excitement and anxiety. On one hand, you’re likely anxious to leave the working world behind and embrace the freedom of retirement. On the other hand, you may be worried about your retirement savings and your financial stability after you stop working.
An obvious way to prepare yourself for retirement is to maximize your contributions in these final years. Take advantage of catch-up contributions to maximize your savings and boost your retirement account balances.
Saving more money isn’t the only strategy to consider, though. There are a number of other steps you can take in these final years to minimize risk and put yourself in better position to enjoy a financially stable retirement. Below are a few additional planning steps to think about:
Fund your health savings account (HSA).
Think Medicare will pay all your health care costs? Think again. Fidelity estimates that the average 65-year-old couple will spend $260,000 on out-of-pocket health care costs in retirement.1 Those costs include things like premiums, deductibles, copays and treatments that aren’t qualified for Medicare coverage.
You can prepare for these costs today by funding a health savings account. Contributions to HSAs are tax-deductible, and the funds grow tax-deferred while in the account. Withdrawals from your HSA are tax-free as long as you use the funds for qualified health care costs. That means you can save today on a tax-advantaged basis to pay for health care costs in the future.
Look at long-term care insurance.
The Fidelity estimate doesn’t even include one of the largest health-related expenses retirees can face: long-term care. The U.S. Department of Health and Human Services estimates that 70 percent of retirees will need long-term care at some point.2 Long-term care is often needed for years, and it can cost a substantial amount of money.
One way to manage those costs is with long-term care insurance. You pay premiums today in exchange for coverage in the future. Many policies cover care provided either in the home or in a facility. Some also have death benefits, so your loved ones will receive any unused coverage after you pass away.
Come up with a Plan B.
What if you reach retirement age and don’t have enough saved to fund your retirement? What if you are forced into early retirement by a disability or job loss? What if you suffer a market downturn right before you retire, impacting your account balances?
While these scenarios may sound scary, they do happen. Even the best-laid plans can be forced off track by the unexpected. Think about what steps you could take to protect your retirement. Perhaps you could downsize, reducing your income needs. Maybe you could gradually transition into part-time work, using your skills and talents to generate income while still maintaining a flexible schedule. Be creative and think of fallback options should your plan go awry.
Ready to plan your final years before retirement? Let’s talk about it. Contact us at TB Financial. We can help you analyze your needs and develop a strategy. Let’s connect today and start the conversation.
2https://longtermcare.gov/the-basics/who-needs-care/
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