FLASHBACK FRIDAY: REASSESSING YOUR RETIREMENT PREPAREDNESS
Let’s look back at how prepared we are in retirement by answering the questions below.
Is my healthcare all set for retirement? Healthcare can be expensive. So, retirees are often advised to shoulder a certain amount of health-related expenses during their golden years and before availing Medicare. If your spouse’s plan covers you or if the previous employer allows you to obtain coverage even after you resign or retire, early retirement is for you.
You may want to look at your Health Savings Account. If you have one, take advantage of its tax-free distributions to shoulder out-of-pocket eligible medical expenses. However, if you leave your job, you won’t be able to make use of and make contributions to the HSA.
If you earn between 100% and 400% of the poverty level, consider the healthcare subsidy care of the Affordable Care Act. Even if you are not eligible for the subsidy, the Obamacare has come up with different health options.
The Consolidated Omnibus Budget Reconciliation Act may prolong a healthcare coverage after resigning. Without your previous employer’s contributions though, the COBRA costs may be more expensive than alternatives.
Do my retirement plans have early withdrawal penalty?
Nobody wants to pay unnecessary charges or penalties. For instance, if you have a 457 plan, a retirement savings with no withdrawal penalty, retiring early and withdrawing money from the plan won’t led to extra fees. Still, you will pay taxes on each withdrawal.
One option of having a penalty-fee retirement is to create various substantially equal withdrawals for five years at the very least or until such time you turn 59 1/2. Similar to a 457 plan, you will pay taxes on each withdrawal.
For those who have 401(k), if you continue working until 55 years old, you can take some money from that plan with incurring penalty when you resign or retire, provided you do not roll into into an individual retirement account. Also, if your 59th birthday was six months ago at the very least, you are qualified to withdraw money without penalty.
Can I live on my retirement budget? Take into consideration all your sources of income. If you think you can live within your retirement budget for at least three months, you can start leaving the workplace for good and make the most of your golden years.
Have I settled all my debts? If you do not have any mortgage, credit lines, or other debts to pay, retiring early is for you. Being debt-free signifies the availability of your retirement income and savings, which you can use to enjoy retirement.
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