American Equity Investment Life : Top 10 Retirement Planning Questions

From health care concerns to long-term retirement income, here are answers to important questions about preparing for retirement

Preparing for retirement can be an exciting time, but it can also spur a lot of unknowns and questions. You've probably thought a lot about what you want to do in retirement and the many goals you have set for yourself, but what path will you need to take to get there?

No matter what you envision for retirement, it's important to have a plan. Here are some answers to common questions you might have as you start to reach retirement age.

1. What should my goals be for retirement?

Your dreams for retirement are going to be unique. The retirement goals for one person will most likely differ from another, and that's perfectly normal. It's time to start thinking about your priorities. Do you want to maintain the same type of lifestyle you had during your professional career? Do you want to spend more time traveling? Do you want to downsize and move to a warmer climate? Do you want to spend more time with family? Once you have a better vision for your retirement goals, you can more effectively start creating a plan or roadmap of how you want to get there.

2. When should I retire?

There is no 'correct' age to retire. For some people, taking early retirement before the age of 67 is best for them. For others, retiring at a later age is a better choice for their personal needs and finances.

According to a 2019 report from the Insured Retirement Institute, one-third of baby boomers surveyed are planning to retire at age 70 or older, or not at all. In addition, one-third of employed boomers surveyed who are between the ages of 67 and 72 are postponing their retirement. There are many factors that go into deciding the right age to retire, including Social Security benefits, health care costs, finances and more.

3. When should I take Social Security?

Social Security retirement benefits will likely play a role in the majority of people's retirement decisions. According to a 2020 report from the National Institute on Retirement Security, 40.2 percent of older Americans surveyed only receive income from Social Security in retirement.

When planning to collect Social Security, there are some important ages that will factor into how you design your retirement plan. The earliest age you can start receiving Social Security retirement benefits is 62; however, the benefit amount will be less than if you wait until your full retirement age to receive benefits. The closer you wait until age 70 to receive Social Security benefits, the higher your monthly benefit amount will be.

You can learn more about Social Security retirement benefits and retirement age here.

4. How can I apply for Social Security benefits?

The Social Security Administration recommends applying for Social Security benefits four months before you want them to start. For example, if you want your Social Security retirement benefits to start at age 62, you should apply at the age of 61 and eight months. You may be able to avoid a trip to your local Social Security office and apply for your retirement benefits online.

5. How will I pay for health care in retirement?

The vast majority of people become eligible for Medicare at age 65. If you retire before age 65, you will likely need a private insurance policy to help cover your health care costs.

The Insured Retirement Institute report stated, 'An average healthy 65-year-old couple retiring in 2018 could expect to pay $363,946 ($537,334 in future value) in lifetime Medicare and supplemental insurance premiums and out-of-pocket costs, and this amount does not include the cost of long-term care.'

The report also stated more than four in 10 boomers surveyed erroneously believe Medicare will cover their long-term care expenses.

Even after you're 65, you may want to look into an additional insurance policy to help supplement your long-term care needs in retirement.

Understanding Medicare can be confusing. You can learn more by visiting this website or talking with a qualified professional.

6. What other sources of income should I have in retirement?

The Insured Retirement Institute report stated only 55 percent of boomers surveyed have any money saved for retirement, and almost one-half of the 45 percent who don't have retirement savings did at one time.

If you're looking to maintain the same lifestyle you had during your professional career, a good plan is to have a well-rounded portfolio with income coming in from multiple sources. These sources can include Social Security benefits, 401(k)s, possible workplace pensions, individual retirement accounts (IRAs) and other long-term retirement income products, such as fixed index annuities.

The Insured Retirement Institute report stated, 'Tax-deferred earnings is also a key aspect of investment products for boomers. About six in 10 boomers say tax deferral is very (29%) or somewhat (29%) important when selecting a retirement investment product.'

7. Should I look for ways to increase my income in retirement?

First, consider tracking your expenses to see how much you spend in a week, month, six months or even a year. Once you have a better idea of how much you're spending on your living expenses, you can start creating a budget for yourself and determine how much you'll need on a regular basis in retirement. There are many different types of budget plans, and you can find more information on the one that might work best for you here.

The Insured Retirement Institute report showed more than 80 percent of boomers surveyed believe they are living within their means, but 20 percent acknowledged sometimes getting behind on their bills. In addition, seven in 10 boomers surveyed stated they believe they are adequately insured; however, they aren't insuring one of their biggest risks, which is maintaining income throughout retirement.

There are different ways to help alleviate concerns about not having enough income throughout retirement. With your retirement portfolio, you could look for products that offer a guaranteed source of lifelong income.

In addition, if you're still in the early stages of retirement and don't want to stop working completely, you could look for part-time employment to help supplement your retirement income. Retired teachers are known to sub in their local school district and retired nurses are still on call to pick up hospital shifts that need to be filled. Some professionals choose to consult after retirement or find a money-making hobby.

8. Should I downsize?

Apprehension about empty-nesting or having a house that is too big for your needs is a valid concern as you prepare to enter retirement. You may want to move to a warmer climate or to be closer to family members. Downsizing can help decrease the monthly costs of your housing bills, such as rent, mortgage, homeowner's insurance, property taxes and utilities.

According to the Insured Institute Report, 'The top two responses regarding actions boomers plan to take if they run out of money during retirement are to downsize in order to get by on Social Security alone (58%) and/or attempt to return to work (37%).'

9. Should I have an estate plan?

You never know what the future might hold, but one thing that can help provide reassurance is to have an estate plan to protect you and your family. Retirement is a great time to work with an attorney to take care of the necessary paperwork and legal documents needed to protect your assets and family members in case of an emergency.

According to the Insured Retirement Institute report, 'Approximately one-third of boomers have taken steps to protect themselves in the event they experience some form of cognitive decline, such as creating a written document detailing their wishes and appointing someone to manage their affairs.'

10. Should I work with a financial professional?

Preparing for retirement can seem like a lot of responsibility with numerous tasks that need to be managed. But, it's OK to not know where to exactly start with your finances. Financial professionals can offer advice and guidance about investments and personal finances and work with you to help meet your retirement and financial planning goals. Your ideal retirement plan is going to be unique and centered around your individual long-term goals, and financial professionals can help you make the decisions that will work best for you.

The content provided is for informational purposes only and does not constitute advice. For specific details on how this may apply to your personal situation contact your personal financial advisor or insurance agent for more details. American Equity contracts are only sold through independent agents. Please contact your state insurance department to see if there is an independent insurance agent in your area appointed to sell American Equity annuity contracts. American Equity Investment Life Insurance Company® does not offer legal, investment, or tax advice. Please consult a qualified professional. Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC.