MONEY MATTERS

IS YOUR BUDGET RETIREMENT-READY?

By Margaret Briller

Wherever you are on your retirement journey, the main objective is to retire comfortably with enough money for life’s next stage. If you are uncertain about your long-term financial plan, it’s a good idea to talk things over with a qualified financial planner.

Here’s an example: If you retire before Medicare kicks in, you’ll need to budget for health insurance, says Todd Lipps, Vice President of National Financial Resources in Cleveland.

“The most likely options for health insurance coverage prior to age 65 come from your current employer (COBRA or a company retiree benefit), a healthcare marketplace plan (healthcare.gov), or an individual policy through a licensed health insurance agent,” Lipps says.

“Your medical needs, overall health and income will guide your insurance decision. You will be able to form a budget once you’ve determined your best coverage. I suggest engaging a licensed health insurance agent to determine your best option.”

Next Moves

Lipps says that effective long-term retirement budgeting requires two calculations: a dollar figure for your expected needs, wants and goals throughout your remaining lifetime, and a good estimate of future income and the value of assets.

“Inevitably, a major disruptor of a successful budget is inflation, especially with services and health care. Developing a budget without close attention to the erosion of purchasing power could easily result in a failed plan,” Lipps says.

Scott Marsh, licensed financial advisor at Edward Jones in Cuyahoga Falls, says there are pitfalls when people think they are financially ready for retirement but really aren’t.

“Soon-to-be retirees must understand that their retirement will look much different than that of their grandparents,” Marsh says.

“With so much focus on healthier lifestyles and preventative health care, we’re living much longer. You need to ensure you have enough assets to last. Retirement plans should account for you to live at least 25+ years (retiring at 65). Adjusting your spending, investment asset allocation, and accounting for cost of living increases due to inflation will be critical for success.”

BUT I THOUGHT…

Retirement financial planning means assessing not only known costs and income but also leaving room for unforeseen expenses.

“The other thing that comes to mind is how easy it is to forget to plan for the unexpected,” Marsh says. “It’s easy to plan for the expected, but planning for the unexpected may be the most important thing you do, especially when it comes to estimating future health care costs. Ultimately, with so many choices and possibilities, the most harmful mistake you may make is deciding not to consult a professional, licensed financial advisor to help create and execute a plan that’s unique to you.”

For anyone ready to retire and wondering if they can afford to, Lipps offers a few suggestions:

“Create a written retirement plan with the help of a financial planner to be reviewed on an ongoing basis. Financial planners can best assist those who have a good idea of their expenses, and knowledge of their current or future income sources and assets. If you have not already started receiving Social Security, visit ssa.gov or refer to your annual statement to estimate your future benefit.”

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