Nearing retirement can be both exciting and scary. Haven’t you been waiting for this day since you entered the workforce? It’s a chance to relax, pursue passions, and enjoy the fruits of decades of hard work. But let’s be real. Retirement can also feel daunting, especially when it comes to finances. Even from an early age, we have learned how important it is to put money away for retirement, as well as any future needs. Ask yourself this. Are you financially prepared for the lifestyle you envision? Have you accounted for unexpected expenses or rising costs? If your savings don’t amount to as much as you imagined, Social Security benefits can be an invaluable tool. However, to live comfortably after retiring and maintain the lifestyle you have grown accustomed to, there are a few things to keep in mind. Here are some practical questions to ask and steps to help you confidently prepare for retirement.
What are your Estimated Benefits?
Social Security can be a cornerstone of your retirement income, but it’s essential to understand how much you’ll receive. Start by creating a mySocialSecurity account at ssa.gov. This account allows you to:
- View your estimated monthly benefits based on your earnings record.
- Check your full retirement age (FRA), which varies depending on your birth year.
- Verify your earnings history for accuracy—mistakes could cost you in benefits.
Why is this important?
Because your estimated benefit amount depends on your earnings record, by reviewing and correcting errors now, you can ensure your benefits accurately reflect your work history. Proactively managing your account also eliminates unnecessary headaches when you are ready to retire. Most companies are trying to do away with paper statements, so unless you have requested that the Social Security Administration mail your statements, the only way to view them is online. This account uses your real earnings to estimate the amount you can expect to claim at full retirement age.
When will you Claim?
Timing is everything when it comes to Social Security benefits. Did you know you do not have to claim benefits immediately upon retirement? You don’t have to start collecting benefits the moment you retire. Delaying your claim can significantly increase your monthly payments. The longer you wait to claim, the more money you will receive; this is why experts strongly suggest that you plan for what age you will officially claim your benefits.
Here is how it works:
- Claiming early (as early as age 62): You’ll receive reduced benefits—up to 30% less if you claim before your FRA.
- Claiming at FRA (66 or 67, depending on birth year): You’ll receive your full benefit amount.
- Delaying beyond FRA (up to age 70): Your benefits will increase by approximately 8% per year.
If you have sufficient savings to bridge the gap between retirement and claiming benefits, delaying can maximize your monthly income for life.
Why is this important?
You want to ensure you have more than enough in savings to get you through the first few years you do not wish to claim. For this reason, it is good that you take plenty of time to consider the age you should begin taking benefits. Think about your financial needs, health, and life expectancy when deciding the best time to claim.
Are you Married?
If you’re married, coordinating Social Security benefits with your spouse can boost your household’s overall income. Here is how:
- Higher-earning spouse delays benefits: By waiting until closer to age 70, the higher-earning spouse can lock in a larger benefit amount. This scenario can be especially advantageous if the other spouse outlives them, as the survivor can claim the higher benefit.
- Plan claim timing together: Decide whether both spouses will claim early, delay, or stagger their benefits to optimize income streams.
Couples who plan strategically, often enjoy greater financial security in retirement, particularly if one spouse outlives the other.
Why is this important?
This will increase overall income, and if one spouse is to pass, the other can claim the entire benefit amount of the deceased. You should be considering when each of you will claim and how much retirement income you are expecting. The earlier you start preparing, the more enjoyable your retirement will be!
Build a Comprehensive Savings Plan
While Social Security provides a baseline, it’s unlikely to cover all your retirement expenses. According to the Department of Labor, you’ll need about 70-90% of your pre-retirement income to maintain your standard of living. Supplement Social Security with these savings vehicles:
- 401(k) plans: Take advantage of employer matches to maximize contributions.
- IRAs: Both traditional and Roth IRAs offer tax benefits to help your savings grow.
- Health savings accounts (HSAs): These can be a tax-efficient way to save for healthcare costs in retirement.
If you’re nearing retirement and your savings aren’t where they need to be, consider boosting contributions and cutting unnecessary expenses.
Why is this important?
By building a robust savings plan, you ensure financial independence and the ability to maintain your desired lifestyle, no matter what surprises life throws your way. The earlier you start saving, the more you benefit from compound growth, making it easier to achieve your retirement goals.
Create a Retirement Budget
One of the most important steps in retirement planning is creating a realistic budget. You may have dreams of living your best life—maybe you’re eyeing that shiny sports car, a new boat, and a jet ski. Whooo! But before you go all out, let’s make sure you’ve got the essentials covered Think about the lifestyle you want and the expenses you’ll need to cover:
- Essential costs: Housing, food, healthcare, and utilities.
- Discretionary spending: This is where the fun comes in—travel, hobbies, and yes, maybe even that jet ski (responsibly!).
- Emergency fund: Unforeseen expenses like home repairs or medical emergencies.
Why is this important?
Having a realistic retirement budget helps you avoid running out of money during what should be your golden years. Without a clear plan, it’s easy to overspend early on and then struggle later—no one wants to be stuck choosing between groceries and medical bills. A budget gives you the freedom to enjoy life without financial anxiety, ensuring you can balance your needs, your wants, and your just-in-case moments.
Seek Professional Guidance
Retirement planning can be complex, and you don’t have to do it alone. Retirement planning can feel overwhelming, but you don’t have to navigate it alone. At Empower Brokerage, we are here to help you create a clear and personalized roadmap for your retirement. Whether you’re wondering how to maximize Social Security, navigate Medicare options, or build a sustainable income plan, our experts can guide you every step of the way. Whether you’re five years or 15 years away from retirement, our professional guidance can help you feel more confident about your financial future. Retirement should be about enjoying life, not stressing over finances. Let us help you take the guesswork out of planning so you can focus on the retirement you’ve worked so hard to achieve.
Life Insurance Questions?
We hope that this information on steps to retirement is useful to you.
This article was updated in December 2024.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
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