Retirement Factors You Can’t Forget
Retiring soon? Take into account these often overlooked factors.
How will you replace your income?
Experts suggest you’ll need to replace about 80% of your pre-retirement income when you retire. You won’t be getting the same paycheck you get now, so how will you replace that income?
Most people draw their retirement income from various sources.
Social Security. Never designed to replace 100% of your paycheck, Social Security benefits typically account for about 40% of the income that retirees receive. The average monthly benefit is $1,503. One big decision you’ll make is when to begin receiving your benefits. You can start claiming benefits as early as age 62, but that can mean a reduction of up to 30%. Waiting can pay off. Each year after normal retirement age that you delay starting benefits, your monthly benefits will likely rise 7% to 8%. To estimate your Social Security benefit, visit ssa.gov.
Conduent Savings Plan. Our 401(k) plan will likely need to replace a chunk of your income. That’s why we encourage you to start saving early and to save as much as you can. As you get closer to retirement, you’ll start shifting from an accumulation mindset to a spending mindset. How much can you withdraw each year to ensure your money lasts?
Any other savings or investments. Having other personal savings and investments like a traditional Individual Retirement Account (IRA) or Roth IRA to supplement the Conduent Savings Plan is helpful.
Part-time work. If Social Security and other savings won’t replace enough of your income, consider a part-time job. A recent Gallup poll found that about 75% of Americans plan to keep working after normal retirement age. Consider turning a hobby into a business or looking into seasonal work.
Where will you call home sweet home?
Where will you hang your hat when your working days are behind you? These elements will all play a part.
Lifestyle. What kinds of hobbies/interests will you pursue? Are you an avid hiker who wants to be near the mountains? Or would you rather be in an area with a thriving entertainment district?
Family and friends. How close do you want to be to your family? If you won’t have family close by, do you have a support network of friends that you’ll be able to turn to if you need help?
Taxes. Do you know what your tax bill will be? Some states have no income tax but may have higher property taxes or sales taxes. Other states have a flat tax, while some states have nine or more different tax brackets. And some states offer tax breaks for pension benefits.
Housing. Buy or rent? Big yard or zero lot line? Condo or single-family home? These decisions will help drive where you decide to live.
Health care. How close will you be to health facilities and hospitals? If you have a health issue, you’ll want easy access to doctors who specialize in your condition.
How much will health care cost?
Health care may be one of the biggest costs in retirement, but many people forget to include it in the budget.
A healthy 65-year-old retiring in 2022 will spend on average between $137,000 and $300,000 on health care over their remaining lifetime. Learn more about those numbers here.
Follow these steps to plan ahead for health care costs.
Do your research. Get familiar with the A, B, C, and Ds of Medicare. You’ll need to decide if you want Original Medicare (Parts A and B) or a Medicare Advantage Plan (Part C) that includes both Parts A and B. Part A is hospital insurance; Part B is medical insurance.
Parts A and B are provided through Original Medicare. You’ll have to use a doctor or hospital that accepts Medicare.
A Medicare Advantage Plan is sometimes called Part C and includes Parts A and B. Coverage is provided through Medicare-approved private insurance companies.
Factor in prescription drugs. Original Medicare does not include prescription drug coverage, so you may want to elect Medicare Part D. A Medicare Advantage Plan may already offer prescription drug coverage.
Know that Medicare may not be enough. If you enroll in Original Medicare, you may want to buy a Medigap policy from a private company. This policy can help you pay for costs that Original Medicare doesn’t cover, such as copayments, coinsurance, and deductibles. (If you enroll in a Medicare Advantage Plan, you can’t purchase a Medigap policy.)
Participating in an Anthem or Kaiser Consumer Choice Plan? Consider fully funding your Health Savings Account (HSA). In retirement, you can use your HSA to pay your Medicare or COBRA premiums.
Learn more about Medicare at medicare.gov.
Need help with the ins and outs of Medicare?
Contact Health Advocate (available if you’re enrolled in an Anthem plan). A Health Advocate expert can walk you through your Medicare options so you can choose the plan that’s right for you and your budget. Learn more.
Live chat with a Health Advocate expert at healthadvocate.com/conduent or call 1.877.776.6211.
Build Your Budget
Add it up. Add up your total monthly expenses in retirement. Some may be lower than or the same as when you were working, but others (such as health care costs) may be higher. Get budgeting tips here.
Consider timing. You may be used to getting paid weekly or bi-weekly. In retirement, you may receive one Social Security or pension payment that needs to last the whole month. Look at when your bills are due. Can you align the due dates with when you receive your income?
Plan for fun and the unexpected. You’ve got time for the fun stuff now — make sure you can afford it. Plus give yourself some wiggle room in your budget. Keep some assets liquid. Don’t lock everything in income-producing investments. You’ll need to access your money for unexpected expenses that crop up, such as car repairs or medical bills.
Understand tax changes. As a retiree, you may not be eligible for certain write-offs anymore, such as college tuition or mortgage interest. But you may be eligible for new kinds of tax breaks. Consider meeting with a financial planner who can help walk you through everything.
Do a trial run. Practice living on your retirement budget before you retire. Is this reasonable or do you feel stifled? If it’s not working, you may need to make some adjustments. What if you keep working for a few more years?