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The key to successful financial planning for retirement is the same as for many aspects of life: learn all you can, consult with an expert, and make prudent decisions.
The nonprofit, editorially independent Consumer Reports recently listed five key sources for financial planning toward or in retirement:
ssa.gov. The Social Security Administration’s website covers all the basics of Social Security, including information on starting benefits at age 62, as late as 70, or somewhere in between.
irs.gov. Taxes are a key part of financial success in retirement, so learn the rules and implications on things like IRA contributions and withdrawals.
pbgc.gov. The Pension Benefit Guaranty Corporation (PBGC) insures many traditional, defined-benefit plan pensions, up to certain limits. The PBGC doesn’t cover defined-contribution plans, such as a 401(k).
medicarerights.org. The Medicare Rights Center is a nonprofit advocacy organization offering a guide to the program’s benefits. The official government site is medicare.gov.
usa.gov/retirement-planning-tools. Find worksheets designed to help you work toward financial security in retirement.
nerdwallet.com. This site offers articles, advice, and worksheets.
As to specifics related to retirement in North Carolina, this publication’s website, RetireNC.com, offers an overview of the state and a calculator to compare costs of living for where you live now versus where you might live in North Carolina.
Vision Retirement, offering paid “planning, advice, and fiduciary investment services” offers specific pros and cons for North Carolina retirement. Those include the state being in the top four most popular for retirement, the state’s tax-friendliness, moderate costs for homeowners insurance and health care, as well as free education opportunities after the age of 64 at any of North Carolina’s community colleges or any of the 17 UNC campuses.
Vision Retirement asserts that it “is not surprising that North Carolina is retiree-friendly with respect to Social Security benefits, inheritance, and estate taxes, as these taxes simply don’t exist in the state, allowing you to pocket more money and leave more to your heirs.
“However, North Carolina charges state income tax and taxes most retirement sources such as 401(k)s, pensions, and IRAs—hence the ‘moderate’ tax-friendly label. The state also charges a flat tax rate of 4.50% that will gradually decrease to 3.99% in 2027.”
Good Tips Abound
In aiming toward financial security in retirement, consider the following broad-based suggestions:
Assess income and expenses. Identify all sources of income, including Social Security, pensions, retirement accounts, part-time work, and any other investments. List all monthly and annual expenses. Categorize them into essentials like (housing, utilities, food, health care) and non-essentials (entertainment, travel).
Make sure to have comprehensive health insurance. Consider Medigap or Medicare Advantage plans to cover gaps. Budget for prescriptions, medical supplies, and out-of-pocket costs. Consider setting up a Health Savings Account (HSA) if eligible.
Debt. This, of course, must be managed, and its reduction is a priority. Pay off high-interest debt, such as credit cards. Consolidate loans at lower interest rates. Schedule manageable payments on those debts.
Long-term care. This could be a major consideration, if not now, then eventually. Long-term care insurance will cover potential future needs. Set aside funds specifically for this.
Maximize savings. Establish an emergency fund for unexpected expenses. Continue to contribute to retirement accounts if possible. Required Minimum Distributions (RMDs) should be calculated and planned for.
Review subscriptions and memberships. Cut unnecessary ones.
Discounts. Senior discounts for travel, dining, entertainment, and retail can be substantial. Public assistance programs like Medicaid, food assistance, and housing support are beneficial for those who are eligible.
Estate planning. Ensure your will and any trusts are up to date, and assign your power of attorney for financial and health care decisions. Update beneficiaries regularly.
Seek Professional Advice
Consult with a financial advisor specializing in retirement planning and use free resources offered by nonprofits.
Fee Only Financial Planners have six starter rules for those wanting to manage investments:
1. Keep it simple. No-load index mutual funds or ETFs. Good diversification, low management fees, long-term positive records.
2. Buy individual bonds. Low cost and a defined maturity date should match your goals for the funds you are investing.
3. Low cost. See 1 and 2 above.
4. Invest consistently and periodically and start today. Even if you have procrastinated, today is the day to start.
5. Do not invest in anything you do not understand. And do not invest in anything that cannot be explained in three sentences or less.
6. Diversify. And think about diversification in terms of your total net worth. How much of your wealth is concentrated in real estate, other hard assets, or in one company/industry?
Ultimately though, if you go it alone, you’re rolling dice. Talk to a planner and see how that works for you.
