Planning To Retire in 2015? You’ve Come To the Right Place

For those whose 2015 calendar includes a retirement party, it’s time to get to work.

Even for potential retirees who have spent years planning and saving, there’s a to-do list that needs attention to ensure finances are running smoothly. Before collecting that final paycheck, new retirees need to make important decisions. And it’s not just money. There’s also the issue of how people are going to fill their time in a rewarding way.

Social Security

For many retirees, their first step when leaving their full-time job is to sign up for Social Security payments. That could also be their first mistake. Here’s why: Delaying Social Security at least until full retirement age (which is gradually increasing to age 67)—or, even better, until age 70—results in larger benefit payments. For example, for those eligible for full retirement benefits at age 66, waiting until age 70 will bring monthly payouts equal to 132% of the regular monthly benefit. “It’s hard to overstate how important this is,” says Cheryl Costa, financial planner at Forteris Wealth Management in Framingham, Mass. “People shouldn’t fall into the trap of, ‘I have to file now because it’s free money.’ ” Ms. Costa encourages retirees to visit a local Social Security office in person to see what their exact benefits would be. One option is what’s known as a “file and suspend” for the higher-benefit spouse, which could result in a higher benefit for the lower-benefit spouse until the higher-benefit spouse takes full benefits at age 70.

Medicare and Health Care

Even if a retiree isn’t filing for Social Security benefits, he or she needs to sign up for Medicare at age 65 or risk higher premiums. “It’s important to understand what your coverage will be, what some of your out-of-pocket expenses are going to be,” says Judith Ward, a senior financial planner at T. Rowe Price. Many retirees are surprised to learn Medicare doesn’t cover vision and dental, which is often costly for older adults. Out-of-pocket expenses for medication can be much higher with Medicare than under many corporate health plans.


More broadly, people approaching retirement should assemble a detailed income and spending budget. It should include setting aside funds for inevitable emergencies or one-off big expenses, such as replacing a car. Often this is a source of worry. But David Lewis, a financial planner at Resource Advisory Services in Knoxville, Tenn., says he has seen both sides of the coin: instances where retirees have to tighten their belts—and cases where retirees are in better shape than they thought. Either way, “the sooner you can figure that out, the better,” he says.

Ms. Costa suggests retirees live on their expected budget for at least six months before they stop working to see if it’s realistic. “People generally ‘low ball’ their [spending] estimates,” he says, “and while it might make their projections look better, it doesn’t do anyone any good if the plan fails right out of the gate.” At the same time, retirees—in the first years after leaving the office—should expect to adjust their budgets as they settle into their new lifestyle. The earlier big adjustments are made—such as downsizing to a small, less-expensive home—the bigger the effect on household finances.


Again, dollars are only part of the pre-retirement equation. “Many times people haven’t thought about the nonfinancial sides of retirement,” says Ms. Sherrard. Retirement can be a big change for those whose lives revolved around work. Ms. Sherrard encourages potential retirees to think deeply about how they’ll stay engaged and have a meaningful life—over a span of 20 or 30 years.

“A lot of people feel, ‘Oh, I’m going to play golf and tennis, and those kinds of activities,’ ” she says. “But when you have somebody sit down with an entire week that is blank… they’re at a loss for how they fill that time.”