Everything You Need to Know About Planning for Retirement
As you age your loved ones are likely to bring up a discussion of your retirement. But what exactly does retirement involve and how do you do it? For starters, retirement is not the same for everyone. The general belief is that when you retire you stop working and enjoy leisure for the rest of your life. However, according to the Pew Research Center, this is not the case.
As of 2016, nearly 19 percent of adults over 65 worked part or full time. This accounts for 9 million retired age individuals and is an increase of 6 percent just from 2000. The Great Recession played a major part in this scenario, mainly due to a decrease in investment income and loss of retirement savings for this age group. The most common types of jobs held by retirees are management, sales, legal, personal care/service, and community and social service occupations.
According to these statistics, one in five seniors over age 65 will remain employed to some degree. This changes in the instance that a senior is no longer able to work in their career field, either due to physical restrictions or medical conditions. In this case, seniors often find themselves in need of in-home or private care facilities to help with the essentials, such as making meals and transportation.
For seniors who remain employed, there is a big question of when they should start drawing their Social Security income. The reason being, seniors who start taking Social Security while working may see a decrease in the amount they receive. Also, the age you start receiving Social Security also determines how much you will receive over the course of their remaining years. Here is a quick guide to help determine when to start getting Social Security retirement benefits:
- You can receive Social Security when you turn 62. At this age, you receive 70 percent of the benefit each month.
- At age 67 you are considered full retirement age, and you are eligible to receive the full amount of Social Security benefits each month.
- If you are less than 67 and work part-time or full-time, you cannot earn more than the earnings limit, which was $16,920 in 2017. For every $2 you earn over the earnings limit your monthly benefits are deducted by $1. So if you earned $20,000 a year, you would be $3,080 over the limit, and your annual benefits would decrease by $128 a month.
- If you are 67 and earning Social Security, your yearly earnings limit is $44,880. If you make more than that your monthly benefits are cut by $1 for every $3 you make over the limit. So if you earned $50,000 a year, you would be over the limit by $5,120. Your monthly Social Security check would be decreased by $142.
Optimally, you will wait until you are 67 to start receiving Social Security income. However, if you are unable to work and dependent on this retirement benefit, then it can be a good idea to start drawing Social Security at 62. This all depends on your financial situation and whether you want to continue working, i.e., you have a career in which you feel confident and secure or own your own business and want to remain at the helm.
Another age-related retirement question involves withdrawing from a 401k or IRA. If you have either of these retirement plans, then the goal is to have this money accessible during your retirement. However, as with Social Security, if you withdraw money too early it can jeopardize the amount you receive.
Generally, most retirement plans allow you to start withdrawing funds penalty-free when you are 59 1/2. However, you can wait until you are 70 1/2 to start taking these distributions, which can help you make more money off of your investment portfolio. If you take distributions before you turn 59 1/2 there is the tax penalty to deal with. You will be assessed a 10 percent penalty by the IRS in the form of income taxes when you file your tax return.
Budgeting for your retirement helps you avoid early withdrawal of either Social Security or your retirement plans. If you set a monthly budget for your basic necessities, including your housing, food, transportation, and medical care, you can avoid spending more than you have. One way to reduce your expenses is to liquidate your personal belongings, properties, and/or housing.
If you have spent the past 50 years in a six-bedroom house, but are now living alone, then it is often a good time to downsize. The money you make in selling your larger home can be put to good use in terms of budgeting for retirement. Other liquidations include automobiles, appliances, equipment, and antiques that you no longer need or want. If you would prefer to leave these types of items to your loved ones, then now is the time to create a will.
Visit your attorney to have a will made out that covers all of the items you own, so you can rest assured these will go to the people you want to receive them. By having a will you also reduce the amount of money and time that your inheritance will be tied up in probate court, while also relieving your loved ones of this process.
Types of Retirement Communities
For seniors who are downsizing, one viable option is to move into a retirement community. When considering a type of retirement community that best suits your lifestyle and needs, there are several to choose from.
- For active seniors, there are independent living communities that provide full autonomy along with a community environment. Active senior apartments allow this age group to live in a secure and safe community alongside other senior citizens.
- Individuals searching for LGBTQ senior communities are also able to find independent living and apartments that center on the needs of this community. It offers a protective and welcoming space for seniors who want to live in full health and wellness. For instance, an LGBTQ community for seniors may host social activities and special events based on the interests and timely topics for this demographic.
- Other types of senior living communities include religious-based senior care. This is a type of senior housing that focuses on a religious belief, such as Christianity or Buddhism. Aspects of this type of community typically include onsite religious services and counseling by religious leaders.
- For individuals who are part of Freemasonry, there are options for Masonic senior housing and senior care. This fraternal organization also allows non-Masonic members, such as widows or wives of Master Masons, to live in these types of facilities. The goal is to provide the Masonic community with a place to call home during the retirement age.
- Military veterans can also find senior care based on their affiliation with the military. Senior care for veterans is typically provided by the Veterans Association and local VA chapters. At VA senior living communities only military vets are allowed to live. This enables the Veterans Association to provide customized care, such as physical therapy, PTSD treatment, social services, and short-term rehab, based on the needs of veterans. This treatment is generally covered by VA benefits according to eligibility criteria, such as level of disability and income.
- For seniors who have lived in an upper-class lifestyle, there is often the concern of finding senior housing that is on par with higher expectations. Fortunately, luxury senior living communities are located in most metro areas. These communities are focused on luxurious accommodations and amenities. For example, in a luxury senior apartment, there will high-end appliances and upscale home furnishings. Luxury apartments for seniors also tend to offer services like gourmet food and social activities geared at this socioeconomic demographic, such as golfing or tennis.
There are also senior living communities focused on particular medical conditions and health needs. These range from senior housing for Alzheimer’s and dementia patients, to housing for diabetics and obese seniors. The options for care range from continuum care retirement communities that offer specialized care at various stages of the end of life, to adult day care facilities offering short-term daytime care.
Quite simply there is a senior living community for most types of seniors in the US. The goal is finding a senior home environment where you feel most comfortable and have the most needs being met. However, for every type of senior living experience there is the overall cost to consider.
Cost of Senior Living
In many instances, the bottom line for choosing a senior living community boils down to how much it will cost. The expense of senior housing can easily be the breaking point for deciding where a senior will live. Fortunately, there are ways to bypass finances so that the senior can choose a housing situation or community where they feel most at ease and receive the most applicable care.
The first place to go to receive help with paying for senior living is insurance. Seniors who have long-term care insurance will be set up to use this money to pay for housing in a senior living community. Additionally, long-term life insurance policies can often be cashed in, albeit with a penalty, to help pay for living expenses.
Most often a senior will depend on Medicare to cover living costs. Medicare is the senior health care program available through the federal government. It provides all seniors over the age of 65 with social insurance. This insurance covers everything from primary care visits and home health services to senior living. With Medicare you can secure financial benefits to help pay for the following:
- Nursing homes
- Home health services
- Dialysis facilities
- Long-term care hospitals
- Inpatient rehabilitation facilities
- Hospice care
If you are a low-income senior you may also be eligible to receive Medicaid. This is a social insurance program available to all ages based on income requirements. For income-based senior housing you may be able to use Medicaid and Medicare to cover expenses.
For seniors who have had the financial ability to save for retirement, there is the viable option of using a 401k retirement plan or IRA fund to pay for senior living. These retirement plans, as noted, allow you to receive money at a certain age without penalty. The money earned in a 401k or IRA increases in interest over time. Therefore, the longer you wait to withdraw from these retirement plans for seniors, the more money you may have to use for paying for your senior living needs.
Seniors who have multiple sources of savings and benefits typically pool these together to see what they have as a whole. This often involves a delicate balance of withdrawals based on age limits. In addition, if you are still able to work, then you have to balance how much money you can make so to receive the most from your Social Security income. Ideally, you will have a financial planner or a trusted adult who is experienced with senior budgeting to assist you with making these financial decisions. These are financial decisions that will impact you for the rest of your life, and 99 percent of cases you have a finite amount of funds. The goal is to find a way to stretch these funds to their limit without sacrificing on the quality of care.
Senior Living Lifestyles
Whether you choose to live in a senior apartment, independent living or assisted living community, you want to be able to remain active and viable within your community. The common misconception is that seniors are not able to be active. However, that is the wrong idea to have about retirees. In fact, according to Novant Health staying active and socializing is a vital part of self-care for seniors. This allows seniors to maintain good emotional health, cognitive function, and physical endurance. Additionally, with healthy social interactions seniors are able to protect themselves against illness thanks to the natural immunity support.
Being engaged and active as a senior sends endorphins, which are feel-good hormones, to your brain to help you relax and be less stressed. This, in turn, helps to protect your body against the negative effects of stress, such as lowered immunity, increased resting heart rate, and the build-up of plaque in your arteries. As a result, you feel better physically, emotionally, and mentally—all of which helps to keep you healthy and young at heart.
Yet as a senior there can be limitations on the physical abilities you have. For example, you may not have the stamina to go and run a marathon like you did when you were 32. You may have limited lung capacity or lack of muscle density, or be at risk for bone breaks due to osteoporosis. Therefore, you may need to tailor your senior living lifestyle to best accommodate your current health and wellness.
Some examples of low impact, beneficial activities include golfing, nature walks, bird watching, or going to an exercise class for seniors. However, you should not limit yourself simply to physical activities. To get these same benefits consider volunteering for an organization or charity you care about. This allows you to remain active and social without putting a great deal of stress on your physical body.
Another idea is to pick up a hobby or craft, such as quilting, photography, painting landscapes, or putting together puzzles. These activities help to keep your mind sharp while honing your fine motor skills and connecting brain cells. It also gives you the chance to join like-minded seniors who share the same interests.
Helpful Tips on Choosing a Senior Living Community
So far you have learned how to handle your finances to pay for senior living. You also have a thorough understanding of what kind of senior living communities are available. Now it is time to answer the question: How do I choose the best retirement communities near me?
As noted, there is an extensive array of senior living communities in the US. To help you narrow down the options, we have listed some questions you can ask during the process of finding retirement communities near you:
- What is the geographical location of the community? Is it in the mountains, by the seashore, in a remote area, or in a metro city? You may have a strong preference for living in a certain type of locale, so consider this when choosing a retirement community.
- What is the weather like year round? If you are used to four seasons from snow-covered Decembers to hot and sunny Julys, then perhaps the humidity of Florida is not going to suit you. Take note of the weather all year and really consider how you will acclimate to the conditions.
- What amenities, shopping opportunities, hotels, restaurants, etc. are located near the retirement community? After all, you will want your family to visit you, and if there are fun and exciting things for them to do, and nice places for them to stay, then it will be all the more reason for them to come and visit more often.
- What are the activities offered at the senior living facility? Do they have a set schedule each week, or are there sporadic activities here and there? Is there an event coordinator and activity leader who organizes activities, and are they open to suggestions? If activities are important to you, and senior activities should be, then you want to have plenty of options and opportunities to enjoy these where you live.
- What is the food like? Will you eat cafeteria style foods or have a gourmet chef on site? Will you be required to dine with other residents or have your meals in your own dining room? Think about which style works best for you and find out how the facility handles meal times, as well as snacks.
- Who will be your neighbors? This is a biggie, as you will be living with these people and interacting with them more often than most average homeowners. Request to have a site visit before you make the move. Speak to current residents and get a feel for their personalities. See if you click with anyone, or if you get warning signs from residents as you decide what kind of community the senior living facility accommodates.
- Who is in charge? The same idea goes for the people who are running the place. These individuals will be the ones you turn to in the case of an emergency, and your life may very well depend on them. Furthermore, you want to know you feel valued and that you will be heard if you have any issues. After all, this will become your home and you want to be a part of the community. This involves having a say when things need changing or adjustments need to be made.
- What is on the no-go list? What kind of restrictions are there, such as times of day when you must be in your apartment or limited access to activity areas or onsite gyms? Find out what you cannot do to determine if there are too many restrictions for your liking. If you are not sure about a restriction, such as no smoking or limited visitors, then make sure to ask before you sign the contract for senior housing.
Finally, as you decide where you want to live, there is one more valuable tip to consider. You have the ability to negotiate the price you will pay. Most seniors do not realize this and go with the posted price without question. Additionally, there may be discounts or special offers that you can take advantage of. Ask about these offers to see if there are any future or ongoing options. You may be able to delay your move to a senior community for a short duration in order to take advantage of seasonal discounts. It never hurts to ask. Plus, you may be able to reduce the costs of senior living to help you get more out of your financial capabilities.