Retiring from the workforce is a milestone you have worked towards your whole life. Although retirement is an exciting time that deserves to be celebrated, you will want to be prepared for future years. For example, do you know when other retirees are applying for Medicare? This might be something you never even thought about. Here is a retirement checklist if you want to be prepared for your golden years.
Understand your spending habits
There is a chance that you are unaware of how much money you spend in a month. If so, that’s okay, but now is the time to understand your spending habits. Whenever you enter retirement, you will rely on your retirement savings for income for the rest of your life. You will begin receiving a Social Security check once you apply for your benefits, but this monthly check is not meant to be your sole income as many wouldn’t be able to live off it.
You will want to consider your monthly expenses such as your phone, electric and water bill, subscriptions, and rent/mortgage. Now, think about how often you will want to eat out at a restaurant, visit a museum, see a new movie, or spoil your grandkids. All these things cost money, so you will want to be sure you spend your money wisely and not spend your retirement savings within the first few years. If this were to happen, you would likely return to work.
Control your debt
Drowning in debt is one thing but drowning in debt while retired is another. The more debt you bring into retirement, the more money you will have to come up with to pay down your debts. Since you will soon be on a tight budget, you should consider paying down your debts before officially retiring.
If you have debt in multiple areas, such as credit cards or hospital bills, tackle the “cheapest” debt first. For example, if you owe a few hundred dollars on multiple credit cards, take care of these first. Starting small can help you cancel your debt without breaking the bank.
However, it’s understood that sometimes there are enormous debts you will bring with you in retirement. If this is your case, avoid spending money you don’t have. It’s best not to open up any other credit accounts and to not borrow money from others who you cannot pay back.
When to apply for Medicare
Medicare is federal health insurance for those 65 years and older and others who qualify earlier due to disability benefits. There is a specific time you must enroll in Medicare if you are not working and covered by creditable insurance – this time is called the Initial Enrollment Period (IEP). The IEP is seven months long, begins three months before your 65th birthday month, and ends three months after your birthday month.
You will apply for Medicare Part A and Part B through the Social Security office. If you fail to apply for Medicare during this time and aren’t covered by large employer insurance, you will be charged a lifelong late enrollment penalty. So, you mustn’t miss your IEP!
Prepare for healthcare costs
Those who worked in the U.S. will find it a surprise that Medicare is not free. But, your working years likely funded your Part A premium. If you or your spouse of 1+ years have worked in the U.S. for 40 quarters, equivalent to ten years, and paid payroll taxes, Part A is $0 for you. If you don’t have 40 quarters but have between 30 to 39 quarters, your Part A premium is $274 per month. Those with less than 30 quarters will pay the total Part A premium of $499 per month in 2022.
You will pay for Part B no matter what, though. The standard 2022 Part B premium is $170.10 per month. However, there is a chance you can pay more for Part B if you are in a high-income tax bracket. Medicare Part A and Part B also have deductibles and coinsurance. So, you will want to prepare for these health care costs in retirement.
Retirement is the time in your life when you focus on yourself and only yourself. But, you will want to ensure you are fully prepared for your golden years before you make significant life changes! It’s always beneficial to contact reputable retirement, Social Security, and Medicare experts before you retire to prepare yourself for the years to come.