Retirement is the time in your life when you get to kiss the workforce goodbye and fully live on your own time! The average age people retire at is 62 years old, but many retire earlier or later in life. Many people use their time during retirement to travel, learn a new skill, and spend more quality time with family. Although retirement is the light at the end of the tunnel, there are some things to consider, such as the cost of Medicare, your lifestyle, Social Security benefits, and more. Keep reading to learn six things you need to consider approaching retirement.

1. What’s the lifestyle you want to live?

Did you know experts recommend that you have nearly one million dollars saved for retirement?[1] If you retire early or plan to live out a long retirement, you will have to consider your lifestyle before approaching retirement. For example, if you plan on traveling during retirement, do you have the funds saved away? You will want to consider travel costs, food, entertainment, clothing, and more.

If you like to treat yourself to restaurants, museums, and concerts, you must consider how much these activities cost! Although retirement is supposed to be fun, it can be expensive if that is your lifestyle. According to a Labor Department analysis, 1.5 million retirees returned to work between 2021 and 2022. Try to avoid becoming a part of this statistic by considering your lifestyle choices and costs when approaching retirement.

2. Are you bringing debt into retirement?

The last thing you likely want to bring in retirement with you is debt. Therefore, your debt is something you will want to consider before retirement. It’s understood that debt sometimes doesn’t get paid off like you had planned. So, you will want to think about your options.

Experts recommend tackling your smallest debts first, if possible. So, if you have some credit cards or small personal loans, consider paying those debts off before you enter retirement. If not, contact your loan holder and see if you can refinance your loans to help lower your payments. You may be able to avoid dipping into your retirement savings whenever you reduce your monthly costs and interest rates.

3. Consider the cost of healthcare

Medicare is health insurance for those 65 years and older; others can qualify before age 65 due to their disability. Before retiring, you will want to consider your healthcare costs, such as monthly premiums, deductibles, copays, and coinsurance.

Medicare has two parts: Part A (inpatient coverage) and Part B (outpatient care). If you have worked 40 quarters in the U.S. and paid payroll taxes, you will have a $0 premium for Part A. If you don’t have 40 quarters, you could pay as much as $499 per month for Part A in 2022.

You will pay for Medicare Part B regardless of quarters. In 2022, the standard Part B premium is $170.10 per month. However, if you are in a high-income tax bracket, you will pay more for Medicare Part B. So, these are a couple of costs you will want to consider before you retire.

Now, Medicare Part A and Part B do not fully cover all services. For instance, Medicare Part B covers 80% of your Medicare-approved costs after paying the Part B deductible. Many beneficiaries find that a 20% coinsurance for healthcare services throughout the year can be pretty pricey, especially if you need surgery or dialysis. Therefore, many seniors purchase an additional Medicare plan for cost-sharing help.

4. Are you purchasing additional Medicare plans?

There are two supplemental plans to help with out-of-pocket medical costs: Medigap (Medicare Supplement) and a Medicare Advantage (Part C) plan. Private insurance companies sell both plans.

Medigap plans work secondary to Original Medicare and help cover the “gaps,” such as deductibles, copayments, and coinsurance. There are ten Medigap plans on the market, each covering a different set of benefits. Medigap premiums vary from person to person, as they are based on a person’s age, gender, tobacco use, carrier, and more.

When you purchase a Medicare Advantage plan, you will receive your Part A and Part B benefits through the private insurance carrier. Advantage plans typically have lower premiums than Medigap plans. For example, HMO Advantage plans can have premiums as low as $0 per month. But, Advantage plans can leave you with more out-of-pocket costs compared to Medigap plans.

If you want cost-sharing help for your medical services, look into a Medigap or Medicare Advantage plan. But, you will want to consider the plan’s monthly premiums when you near retirement.

5. When are you taking Social Security benefits?

Did you know that the longer you wait to file for Social Security, the more money you get? On top of that, did you know if you draw your Social Security benefits before your full retirement age (FRA), you can have a smaller benefit? That’s right, and many seniors don’t understand that the age they draw their Social Security benefits can impact the amount on their checks.

You can file for Social Security as early as age 62. But if you draw Social Security at 62 years old, you could reduce your monthly check by $600+. This is a permanent reduction, and returning to work will not increase your monthly Social Security check. For many seniors today, their FRA is not until 66 or 67.

Those who wait to draw their Social Security benefits until 70 years old will receive their maximum Social Security benefit. Before you enter retirement, look at your finances. Can you delay drawing your Social Security benefits? If you can afford to live without a Social Security check, you will receive more money in the future.

6. Consider downsizing homes

In 2017, 46% of senior citizens sold their homes and downsized.[2] With the cost of living on the rise, the number of people downsizing homes keeps growing! Downsizing is defined as making something smaller. So, when you downsize homes, you are moving to a smaller house and not taking all your belongings with you.

Downsizing in retirement can save you money on mortgage costs, utilities, and upkeep. On top of saving money, downsizing can make your home more accessible, clear up unused space, and help declutter your belongings. Downsizing can also open up opportunities you never had before! For example, downsizing can help you move to your dream location. If you have always wanted to live in the north, south, east, or west, consider retirement as the time to downsize and live out those dreams.

Wrapping up

Retirement is the light at the end of the tunnel you have worked towards. But, you might want to consider these six points before you approach retirement!

Author: Alexandria Roland

Alexandria Roland is a Medicare expert, licensed insurance agent, and digital marketing coordinator at Boomer Benefits. As a content creator, she shares her knowledge of Medicare through many outlets, including writing. Alex helps to manage a growing online community of over 30,000 seniors in the Boomer Benefits Medicare Q&A Facebook Group.