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Marc A. Hebert's Money Sense: There's a lot to weigh before deciding if you're ready to retire

By MARC A. HEBERT
June 23. 2017 7:33PM
To those approaching or planning for retirement, recognize the challenges that will be created by the loss of your workplace identity. (Dreamstime/TNS)



Ready, set, retire. The question is, are you ready? Here are a few things to consider when answering that question.

Are you really ready to retire? Are you ready emotionally? You might have many years invested in working, and stopping all at once could be an issue.

You might want to consider what your retirement lifestyle will be like. Do you have a social network of friends to support you? Do you have other activities you want to pursue. Activities could range from donating time to charity, playing golf to taking up a new hobby. If you decide stopping all at once is not going to work for you, perhaps working part time for a while is an option.

Review your finances. Can you live on a retirement budget? If you are not sure, try living on it for a few months to a year prior to retirement. Does it work for you? This is the time to take a close look at the income and expenses you will have during retirement. Understand your cash flow. You also need to understand how inflation affects your expenses. As inflation rises, the purchasing power of your money decreases.

Will you continue to have adequate health insurance? The cost of health insurance has been rising faster than the inflation rate. Find out if you are one of the lucky few who have employer-provided retirement health insurance and, if so, its details. Be sure to factor the costs of private insurance, COBRA, a Medicare supplement policy, co-pays, and deductibles into your retirement budget.

Another retirement consideration is the amount of debt you currently have. Paying down debt during retirement means less to spend on necessities, as well as having fun. It is wise to have a plan to pay off your debts, preferably before retirement.

Are you done paying for your children's education? Do you have someone with special needs to help support? These costs should be quantified as much as possible and worked into your retirement budget.

When will you take Social Security benefits? Be sure to review your claiming options. Delaying the benefits means an increase in the amount; taking benefits before your full retirement age means a reduction. Taking Social Security after full retirement rewards you with delayed retirement credits.

There is a break-even point between receiving a smaller benefit for a longer period and a larger benefit for s shorter time frame. Knowing this will help you choose to be early or late.

There also are claiming strategies for a husband and wife. For example, is it better for one spouse to take the benefit early, while the other earns delayed retirement credits? You need to consider your health pictures and what you will live on while waiting to collect. The goal is to maximize your expected lifetime benefits, taking into account what your survivor will live on when you pass away.

Have you developed a strategy for using your portfolio assets during retirement? Is there a withdrawal rate that helps ensure that your nest egg will last your lifetime? From which account will you withdraw your funds? Will you take some money from your IRA and some from your personal brokerage account? What will give you the best tax result?

After reviewing your retirement situation, you might decide you are just not ready. For each year you delay your retirement, you will have the opportunity to save more and there is one less year of retirement expenses you will have to pay for. These factors alone will help contribute to your successful retirement.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at mhebert@harborgroup.com. Your question and his response might appear in a future column.


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