The coach of a football team is not going to go into a ballgame without a game plan. In fact, the staff will devise a long-term strategy to build the strength of the team before they think about individual games. This is the approach that you should take when it comes to your financial well-being.
It is important to start thinking ahead toward the future as soon as you are embarking on a career path. A lot of people that get older see some of their peers enjoying retirement, but they still have to keep working because they have insufficient resources. There are those that say the retirees are “lucky,” but to a large extent, you make your own luck.
If you can participate in a 401(k) plan or, you should certainly take full advantage of it, and there can often be company matches up to a certain percentage of your contributions. There are not many instances in life when someone will give you free money, but this is one of them.
Aside from the savings aspect, you should fully understand what you can expect to receive from Social Security. You can register your account on the Social Security Administration website to find out where you stand at any given time.
Your benefit will be based on the 35 years during which you earned the most amount of taxable income. The minimum age for an early retirement benefit is 62, but if you go this route, the amount of your benefit will be reduced by somewhere between 25 percent and 30 percent.
The full retirement age for Social Security purposes varies depending upon the year of your birth. Suffice to say that it is somewhere between 66 and 67 under currently existing laws.
You can choose to delay your submission for Social Security benefits beyond the full retirement age. If you do this, your benefit increases by 8 percent for every year that you delay until you reach the age of 70.
The age for Medicare eligibility is 65 for all eligible Americans, regardless of when you were born. This government health insurance program will provide a solid underpinning, but there are copayments, deductibles, and premiums that you must pay yourself. You should take these potential out-of-pocket costs into account when you are analyzing your future needs.
Anticipate Long-Term Care Costs
Approximately 70 percent of senior citizens will need living assistance at some point in time, and 35 percent of elders will ultimately reside in nursing homes. The average length of stay is one year, and these facilities are extremely expensive.
Medicare does not pay for the custodial care that you would receive in a nursing home, so this gap in the coverage is quite significant. Medicaid is another federal/state government administered program that does pay for long-term care.
You are probably aware of the fact that Medicaid is only available to people with very limited financial resources. It is possible to give gifts to loved ones to stay within the eligibility parameters, and you could choose to fund an irrevocable Medicaid trust.
The final piece to the puzzle is the estate planning component. You have to determine how you want your assets to be distributed and discuss your options with a licensed estate planning attorney. There are multiple different approaches that can be taken, and the ideal course of action will depend upon the circumstances.
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