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How You Can Afford to Retire (Sooner)

Here's what you can do now to start building a roadmap to retirement


(Editor’s note: This content is sponsored by Acts Retirement-Life Communities.)

Whether you’re just starting to think about retirement or you’ve been pondering the big event for years, you’ve probably thought a lot about how you’re going to afford it. From health care costs and housing to all those travel goals you’ve got on your bucket list, there’s a great deal to consider and prepare for, financially. How do people manage it, especially if they have their eyes set on retiring early? It all comes down to how well you know your options — the lay of the land that lies ahead. Here’s what you can do now to start building a roadmap to retirement, so you can start enjoying all the exciting benefits as soon as possible.

1. Learn About Social Security’s Flexible Options

Social Security is designed to supplement your pension, if you have one, plus any other retirement savings you’ve accumulated over the years, like an IRA. The monthly stipend you receive is based on your contributions over a lifetime of work, but it can be adjusted according to when you retire.

The common wisdom, if you want to receive the highest benefits possible from Social Security, is to delay your retirement. Waiting until after the traditional retirement age to start taking benefits will increase your monthly check significantly. For example, waiting until you turn 70 means your monthly benefit will be 76 percent higher than it would be if you had started taking the benefit at age 62!

But when you’re looking for ways to retire sooner, that doesn’t exactly seem like an option… or does it? You can be creative with how you manage your Social Security benefits and get the best of both worlds. Here’s how:

You can still make plans to retire early or even at the traditional age of 65. But do go ahead and put off taking your Social Security benefit. The trick is taking a part-time job during retirement – one that you enjoy or one that is at least less stressful or strenuous than the one you’re currently in. The extra income will help with your monthly bills during the period that you’re postponing your Social Security benefit.

What if you already applied to start receiving Social Security? You have 12 months to change your mind, actually. During that period, you may withdraw your application and delay your Social Security benefits. The drawback with this option is that you’ll have to give back any benefits you’ve already received. On the plus side, your benefit “pot” stays put, growing until you’re ready to draw upon it later.

There’s another way out for people who have already started drawing their Social Security benefits. Once you reach the official retirement age (which right now is 66), it’s possible to apply to suspend your Social Security benefits until the age of 70. If you do this, your reward is that you earn extra credits in your Social Security account that will make your monthly check even larger once you do start taking the benefit. Again, in the meantime, if it’s possible to find part-time work to cover your monthly bills, these options for delaying Social Security benefits may be a good option for you if you are looking to retire sooner rather than later.

Want to learn more? Read How to Apply For, and Start Collecting, Social Security.

2. Take Steps to Control Future Health Care Costs

One very legitimate concern when you’re planning your retirement is how you’ll manage to cover your health care costs. It’s one of the largest expenses that retirees have. Much of the uncertainty in this area stems from out-of-pocket health care expenses. Medicare pays a portion of expensive medical services that are considered common, plus things like lab tests and prescription drugs. Medicare Part B covers outpatient services and doctor visits. And should you need it later on in life, Medicaid will cover the cost of staying in a nursing home or home care if you run out of money and can’t pay for these necessary services yourself.

But again, that doesn’t solve your problem if you are thinking of retiring early. There are a few things you can do now to keep the cost of health care lower and also mitigate the impact that your future out-of-pocket health care costs will have. These include:

  1. You can start a health savings account if you have a high deductible health plan. These accounts, called HSAs, are extremely tax-friendly. The money you put in isn’t counted as income. Once it’s in the account, your money will grow tax-deferred. And when you withdraw the money to pay for healthcare, it’s completely tax-free.
  2. Get health insurance through a part-time job. This sounds like a pipe dream, but a growing number of companies are now realizing the wisdom of offering this benefit. Most notably, Costco and Lowes offer great benefits packages, including eligibility for health insurance coverage. UPS is also known to offer benefits to part-time workers, as is Whole Foods. Explore the idea with other employers and you may be pleasantly surprised at what you find.

Click here to read Does a CCRC Makes Sense for You?

3. Consider Downsizing Your Home

Finally, one last idea for creating a retirement plan that you can afford is to consider downsizing your home. Many older Americans find that home maintenance, lawn care, shoveling, and rising utility rates just aren’t their cup of tea any more. They’d rather be traveling, exploring new hobbies or visiting family members who are located far from home. Some couples choose to move to an entirely different state in order to be closer to those family members. Many move to a state where taxes are lower — thus making retirement much more affordable. In short, downsizing to a smaller home can free up money, allowing you to continue to afford your current lifestyle well into retirement.

Looking Ahead

Retirement can be an exciting time that’s full of possibilities. Don’t let uncertainty bring you down. Instead, know the facts, learn what your options are and be creative about how you’ll lead your life once you’re older. In the meantime, you’ve taken the first step by reading this and getting a good sense of what lies ahead.

For more information on retirement, read these articles by Acts Retirement-Life Communities:

By Acts Retirement-Life Communities

Acts Retirement-Life Communities is the largest not-for-profit owner, operator and developer of continuing care retirement communities in the United States. Headquartered in suburban Philadelphia, Acts has a family of 23 retirement communities that serve approximately 8,500 residents and employ 6,200 in Pennsylvania, Delaware, Maryland, North and South Carolina, Georgia, Alabama and Florida. For more information about Acts visit actsretirement.org.

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