Here’s a quick hands-up moment: how many of you can say that you’re truly ready to retire this year? If we were all gathered together in one room, the number of hands that truly go up would likely be a small estimate. Well, maybe not super-small, but small enough to sound alarms of concern.
It’s a fact that many American seniors, or Americans who are about to enter their senior years, haven’t exactly made solid plans for retirement. Honestly, very few Americans likely have enough money to maintain a comfortable income when they retire. Many believe that they’ll be able to rely on Social Security income when they’re old enough to draw benefits. However, with rising inflation and other factors forcing the cost of living to skyrocket, making a plan for how you’ll live once retirement comes around is more important than ever.
Hint: that means relying on more than Social Security benefits to live a comfortable life.
From learning how to make Medicare and its premiums work for you to investing in a retirement fund, we’ve compiled a few tips to help you learn how to finance retirement in 2023. In fact, we’ve worked extensively with our friends at MedicareInsurance.com to put this little primer together. Read on to learn how you can make funding your retirement in 2023 a little easier.
Start a Retirement Fund
The importance of saving enough money to fund a comfortable life in your golden years cannot be stressed enough. Unfortunately, few people consider the necessity of starting some kind of retirement fund until they’re knocking on the door of turning 55. While it’s never too late to start saving for your retirement, the later you start a fund, the more of an uphill battle you’ll have saving enough money to last you for the rest of your life.
It’s true that we pay into a great system to help us stash some form of income for retirement in Social Security. Those benefits alone won’t completely guide you through retirement, though, and with the full retirement age on a gradual incline, the wait becomes longer to receive full benefits.
While, yes, you can technically start drawing Social Security benefits at the age of 62, you only get a portion of the proceeds if you start drawing at that point. As of now, you can’t receive full Social Security benefits until the age of 66 (year of birth 1943-1954) or 67 (year of birth 1960 or later). For this reason alone, it’s important to start some sort of retirement savings fund or plan as soon as possible.
Those of you who are currently in the workforce may be eligible to enroll in a retirement plan provided by your employer. Some of the most common retirement plans employers provide for employees include:
- 403(b) and 457
- Individual Retirement Arrangements (IRAs) and Roth IRAs
- Employee Stock Ownership Plans (ESOPs)
- Pension plans
- Government retirement plans (for government employees)
All or most of these plans require you to allocate a certain amount of money to be drawn from each paycheck to fund them. In many cases, especially with 401(k), 403(b), and 457 plans, your employer will match your contributions up to a certain percentage. The primary drawback to some retirement plans is that they tie into the stock market for funding. If you’re risk-averse, you may seek out a different type of retirement savings plan that is funded by contributions only. This can include a savings account through your bank.
Look for Affordable Health Insurance
Taking care of yourself in your senior years is incredibly important. For that reason, you’ll need a health insurance plan that works for you. If you’re on an employer plan or other private insurance, they may become too expensive to maintain if you’re on a fixed income. This is where Medicare insurance plans can work for you.
When you’re looking into Medicare plans, you have a few different options available to you. These include:
- Original Medicare (Medicare Part A and Medicare Part B)
- Medicare Advantage (Medicare Part C)
- Prescription Drug Coverage (Medicare Part D)
- Supplemental Plans (such as Medigap)
Original Medicare is provided and run by the federal government, which some people may prefer. A plus side to Original Medicare is that many individuals can receive Medicare Part A at zero cost, and Medicare Part B is offered at a premium that can be lower than those levied by conventional health insurance*. On the downside, while Original Medicare covers many medical treatments and services, it may not cover everything you need. As a result, you’d need to take on additional plans, including Part D for prescription drug costs and Medigap to help with copays and deductibles, which can eat at your budget quickly.
If you prefer the convenience of keeping a private insurance plan that comes with the benefits of Original Medicare, a Medicare Advantage plan may be right for you. These plans offer the same coverage as Medicare Parts A and B but often include coverage for services not offered by Original Medicare. For example, Medicare Advantage plans may include:
- Coverage for dental, vision, and hearing care
- Combined Part D prescription drug coverage
- Coverage for transportation to and from medical appointments
- Allowances to help with groceries and over-the-counter medication costs
The best part? Some Medicare Advantage plans are offered at zero cost. However, finding plans that work best for you will require some research and comparison. It’s usually not a good idea to jump into a plan without doing some research and speaking with a licensed insurance agent first.
*Costs of Medicare Part B monthly premiums are calculated depending on your income level.
Leverage Possible Tax Deductions
Many Americans pass up extra money they could be receiving from deductions at tax time because they fear messing up their returns. That’s pretty important, because one small mistake could end up getting you audited. That doesn’t mean that you can’t sit with a trusted tax professional to find potential deductions that could lower your tax burden and put money in your pocket.
If you’re currently enrolled in a Medicare plan, did you know that it’s possible to deduct your premiums? If you meet certain criteria put forth by the IRS, you can deduct Medicare premium expenses. Before you give it a try, make sure you read up on the criteria under which you can use Medicare premiums as tax deductions. If you don’t meet certain age, income, or enrollment requirements, you won’t be able to take these deductions.
It’s Never Too Late to Plan For Retirement
Don’t let the fact that you may be quickly approaching retirement age keep you from planning for it. It’s never too late to start a savings plan, or research Medicare plans, or look into ways you can make your senior years easier.