At present there is nothing scarier than crashing markets! Hence, the scaring question of the hour is whether you have planned adequately to be able to survive in such tough situation. Financial security post retirement will always be your worry and concern regardless of your efforts put in financial planning. But, by taking note of few points, any further unlikely situation can be avoided. So, what are these points? Find out about these points in the following pointers:
Keep an eye on pension plans: Change or reduction in benefits is possible but, they cannot be taken away by the employer. Economic instability is resulting in losses for traditional pension plans and therefore demanding extra contribution by the companies. Hence, the plan benefits of new or existing employees are being suspended by the companies. Hence, you need to be alert and keep a check on when your employer makes changes in the pension plan.
Don't switch jobs frequently: As job change can affect your pension benefits, it is better to check on its effect before switching your job. In most cases these plans have a five-year frame for vesting into benefit. Same is the case with 401 (k) plans where employer contributes same as you. In some cases, you might be able to reap better benefits, if you stay in your current job for a little longer time.
Avail pension benefits from previous employer: Many employees are unaware of the pension benefits and leave a company. Before you change job it is advisable to check with the employer about the benefits that you are entitled to. Definitely track your claim to benefits after your retirement, if the conditions are in your favour.
Don't retire early: The preferred retirement age has become sooner than 65 years due to the busy and hectic lifestyle. Early retirement reduces the retirement benefits considerably. You loose on the salary that you could have earned, extra benefits that you were entitled to and retirement amount.
Lose health insurance benefits: The steep increase in the cost of health insurance is resulting in most companies deciding to phase out the health insurance benefits for the retirees or transferring a major amount to them. However, you are eligible to Medicare benefits until you turn 65 years of age. Post that too, a few of the medical expenditures are covered. This is an important consideration to be made before you plan to retire before 65 years.
Change in Social Security benefits: The retirement age has increased from age 65 years to 67 years of age. The people born during and after the year 1938 are the ones mostly affected by this change in retirement age. At the age of 62 years comparatively decreased benefits can be availed. A reduction of 30% is now applicable instead of 20%, in permanent benefits. Hence, choosing to retire early is unhealthy for financial security.
Ditch lump-sum distribution: Agreeing to lump-sum distribution is not a very safe option. As an Substitute to the monthly pension benefits, some traditional pension plans also offer lump-sum distribution. Ditch lump-sum settlement plan. It is tricky to invest such a sum in some monthly pension plan, even if the offer looks beneficial.
It is difficult to have a proper financial planning for retirement. Thus, it is critical to know about all the possibilities prior to your life changing retirement decision.