Think about what you’ve done to plan for your retirement. Go ahead. Give it some thought. Now imagine that your retirement begins… tomorrow. Are you ready? Have you done everything you should have done? If you’re wincing or your heart has ramped up its pace a bit, take a deep breath. Relax. Even if retirement is just a few years off, there are still some things you can do to prepare. And if many years will pass before you hit retirement age, all the better.
What might you do instead?
Many of us intend to plan wisely and save more, but our hectic lives get in the way. However, if you’re a person with special needs or care for a family member with special needs, you need to cut through the hectic and find the time. “People who have special needs themselves have an extra reason for pragmatic retirement planning,” says Matthew Adamczyk, CLU, CLTC, ChSNA, a Special Care Planner1 with MassMutual Dallas-Fort Worth2 in Dallas, Texas, a general agency of Massachusetts Mutual Life Insurance Company (MassMutual). “Their living expenses may be higher and their likelihood of working to supplement income after retirement may be lower than someone without special needs. And if it’s their child who has special needs, they must plan for their child’s lifetime financial security as well as their own. Even if they find time for planning, it can feel overwhelming. It can really help to tackle just one step at a time.”
Retirement income sources
Historically, retirement funds came from three sources: a pension, social security, and savings, such as an individual retirement account or a retirement savings plan through an employer. Today, however, many employers no longer offer pensions, and the future of social security retirement benefits is being questioned. Regardless of its future, currently, if you have ‘average earnings,’ your social security benefit will be about 40 percent of your pre-retirement earnings3, an amount that isn’t likely to fully support you during retirement.
“Would you rest on this three-legged stool with two weak legs?” asks Adamczyk. “It illustrates how important it is for you to seek the help of an experienced professional in planning how you’ll accumulate money for your retirement.”
“Depending on your situation, there are other ways to fund your retirement, besides the three sources just mentioned, as well as ways to reduce or manage your expenses during retirement,” says Adamczyk.
Social Security Retirement benefits – The amount you receive depends on when you begin drawing benefits. Your spouse and children may also qualify for benefits under your work record, including an adult child with special needs. Review the Disabled Adult Child (DAC) benefit on www.ssa.gov/dibplan for more information.
Personal savings – An overall family financial strategy should include savings for emergencies and certain life events such as purchasing a home, paying for college, and supplementing retirement income. Saving separately for these life events helps ensure the funds are used for their intended purposes.
Insurance – Medical expenses can be quite expensive, especially as we age and health declines. Health insurance can help you manage the cost of prescriptions, medical care, and hospitalization, while policies for long-term care needs can help cover the cost of nursing home care or an assisted living facility.
Other government benefits – Talk to a social security representative to learn about all the benefits offered, such as Supplemental Security Income, Social Security Disability Insurance, Medicaid and Medicare, Extra Help (a low income prescription drug cost program), and the
Supplemental Nutrition Assistance Program (food stamps). Additionally, the federal government offers a Retirement Savings Contribution credit, which can reduce your tax burden when you file your tax return. (www.irs.gov/uac/)
Continuing to work – You might want to work part time, begin a new career, or start a business. It can supplement your income, but if you’re receiving Social Security Retirement benefits or other government benefits, be sure to understand how working or earning income can affect them.
Receiving an inheritance – Knowing whether or not you’re named as a beneficiary in someone’s will can help you plan your retirement strategy. How much might you receive? When might that occur (before or after you retire)?
Reducing debt – Make a concentrated effort to reduce your credit card debt, pay off loans, and reduce or eliminate your mortgage before you retire. You’ll no longer have those monthly payments.
Here are some more things to consider as you work on creating a retirement savings strategy and plan for your life during retirement.
- Prepare for your retirement by learning how to live within a budget now. Another benefit: budgeting may generate more discretionary income to put into retirement savings. “If budgeting seems too difficult,” adds Adamczyk. “try writing down everything you spend money on each month. This will help you see how much your current lifestyle really costs.”
- Decide what your retirement lifestyle will be and the budget you’ll need to maintain that lifestyle. How might you plan ahead to make that lifestyle easier to afford?
- Understand that most retirees spend more money in their early years of retirement, when they are more active. As active as you think you might be, social activities and travel decline in later years, and expenses are more focused on ordinary living costs and health care.
- Research where you might want to live, not only geographically, but also the type of housing. A different state or country? A smaller home in your current city? In a senior community or assisted living facility? Consider availability, cost, ongoing expenses, and other concerns.
- Consider downsizing in other ways. Will you be closing or selling a business? Will you keep or sell recreational vehicles, vacation homes, or other property you may own?
- Improve your home’s energy efficiency and make major home repairs now so you don’t have the trouble or expense during retirement. If you plan to sell your home, it’ll increase its value and improve its attractiveness, which may mean a quicker sale or potentially higher profits.
- Remember that contributions to a retirement account have tax benefits. If you contribute with pre-taxed money, such as regular amounts deducted from your pay for deposit to a 401(k) plan at work, you won’t be taxed on those contribution amounts until you withdraw them4. Contributions to an individual retirement account can be reported on tax returns and can reduce your tax burden. Talk to a tax expert for specific details.
- “After you retire,” says Adamczyk, “you no longer need to save for retirement. All those 401(k) and IRA contributions are now ‘in the bank.’ Eliminating monthly contributions will help make budgeting during retirement easier.”
Get some help
“We often tell our clients to equate creating a financial strategy, which includes their retirement savings, with building a financial home,” explains Adamczyk. “When a couple has a child with special needs, they have to build two financial homes. Simultaneously. One for themselves, another for their child.” When the person with special needs has a separate strategy, his or her lifelong expenses won’t exhaust funds meant for the parents or siblings. A financial professional, such as a Special Care Planner, and a special needs attorney can help you create strategies that work in Conjunction with one another.
This professional team knows the special needs community – the laws that affect them, the issues they face, the programs and services that contribute to their wellbeing, the network of support that’s at hand, and the financial options available. They’ll help you review what you have in place, what your short- and long-term goals are, and what you need to do to meet them. Could you use a team like that? Go ahead. Give it some thought. Now imagine that your retirement begins…tomorrow. Are you ready?
1 The Special Care Planner, a title used by MassMutual financial professionals, who have received advanced training and information in estate and tax planning concepts, special needs trusts, government programs, and the emotional dynamics of working with people with disabilities and other special needs and their families. The certificate program was offered by The American College in Bryn Mawr, PA, exclusively for MassMutual financial professionals. Additionally, a designation of Chartered Special Needs Consultant (ChSNC), which evolved from the certificate program, is now offered through the American College for financial professionals. MassMutual financial professionals who have completed the certificate program, or received the ChSNC designation can use the Special Care Planner title.
3 www.ssa.gov/planners/benefitcalculators.htm. Individuals in the higher income bracket can expect to receive a lower percentage; those in the lower income bracket will receive a higher percentage.
4 A 10% penalty, in addition to tax, applies for early withdrawals (prior to age 59 ½).
* The Special Care Planner, a title used by MassMutual financial professionals, who have received advanced training and information in estate and tax planning concepts, special needs trusts, government programs, and the emotional dynamics of working with people with disabilities and other special needs and their families. The certificate program was offered by The American College in Bryn Mawr, PA, exclusively for MassMutual financial professionals.
Additionally, a designation of Chartered Special Needs Consultant (ChSNC), which evolved from the certificate program, is now offered through the American College for financial professionals. MassMutual financial professionals who have completed the certificate program, or received the ChSNC designation can use the Special Care Planner title. A Special Care Planner through MassMutual’s SpecialCareSM program can assist parents in drafting Letters of Intent and can help make a difference in the quality of life for an individual with special needs, their caregiver and other family members. Through SpecialCare you will learn valuable financial strategies, identify financial strategy solutions, access vital information, and meet certified specialists who will work with you and your professional advisors – your banker, accountant or financial planner, lawyer, social workers and health care providers – to review your financial picture and offer options to fit the needs of each situation. For more details, visit MassMutual’s website at http://www.MassMutual.com/specialcare, or call 1-(800)-272-2216.
Founded in 1851, MassMutual is a leading mutual “http://www.massmutual.com” life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of “http://www.massmutual.com/aboutmassmutual/financialinfo/strength” financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders consistently since the 1860s. With http://www.massmutual.com/productssolutions/individualsfamilies/producttype/lifeinsurance/wholelife whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as http://www.massmutual.com/productssolutions/individualsfamilies/producttype/lifeinsurance” life insurance, “http://www.massmutual.com/productssolutions/individualsfamilies/producttype/disabilityincome” disability income insurance, “http://www. massmutual.com/productssolutions/individualsfamilies/producttype/longtermcare” long term care insurance, “http://www.massmutual.com/retire/plansponsors” retirement/401(k) plan services, and “http://www.massmutual.com/productssolutions/individualsfamilies/producttype/annuities” annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset
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