There are lots of articles out there talking about how the smartest move you can make for your retirement is to start saving and investing today. And (of course) if you're young enough to enjoy the power of compound interest, that is absolutely the best advice out there.
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But what about those who are nearing retirement right now? What steps can they take to ensure a healthy and happy life over the next few decades? Read below to see three under-appreciated steps you can make today that'll make a big difference in the future.
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Coordinating with your spouse on Social Security is vitally important
With the way Social Security benefits are doled out, the timing of receiving your first benefit can have a huge effect on both you and your spouse. There are a couple of key rules that need to be understood:
- You can claim Social Security benefits as early as 62, and as late as 70. The later you claim, the more money you'll receive each month.
- If your benefits will be less than half of what your spouse gets, you'll receive spousal benefits. This equates to 50% of your partner's benefits, up to full retirement age. You can only claim these benefits once your spouse has begun claiming.
- When one spouse passes away, the surviving spouse assumes whatever the higher monthly benefit is.
If you sit down and think about all of the variables that come in to play, you can start to see how a one-size-fits-all solution doesn't really exist.
Perhaps you want to leave the largest possible benefit to your partner after your death. In that case, you'd be better off maximizing your own benefit by waiting to claim at 70. Or maybe you'll both receive the same benefit on your own and have enough money to make ends meet starting at 62. Then it might make sense to claim ASAP.
Everyone's situation is different. The key is laying out the important variables, taking the three rules described above into consideration, and figuring out what your best course of action is for Social Security.
Consider a reverse mortgage
Please note, I'm not saying, "Getting a reverse mortgage is a smart move." Instead, I'm saying that if you find yourself in a financial pinch come retirement time, considering a reverse mortgage is a good move.
Here are the nuts and bolts of what you need to know before investigating further. When you get a reverse mortgage, you're essentially turning your house back over to a bank, and the bank is paying you for that. Since you won't need the house after you pass away, it's a way to tap the equity you've built up to help pay the bills after retirement.
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But there are important caveats. If you stop paying any of the bills, including insurance, on the house, the bank could foreclose and kick you out of your house. The same will happen if you let the general condition of your house deteriorate. The bank does, after all, own the house -- and it doesn't want to own something that's falling apart.
And perhaps most importantly, if you and your spouse move out of the house for any reason -- to be closer to grandchildren, to enter a nursing home...you name it -- then the bank will take possession of the house, and you'll be left with nothing.
Obviously, getting a reverse mortgage isn't a decision to be made lightly. But for some people who absolutely need to free up cash, it can provide a needed lifeline.
Don't forget about the actual experience of retirement
I saved what I considered to be the most important -- and most under-appreciated -- tip for last. You need to make sure you have purpose and meaning in retirement. Before rolling your eyes at this warm and fuzzy concept, there are real numbers to back this up.
Wes Moss, radio host, author, and chief investment strategist at Capital Investment Advisors,has done the research. He has found that one key differentiator between happy and unhappy retirees is the number of core pursuits they have upon entering retirement.
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What's a core pursuit? It can be anything that gives you purpose, meaning, or a sense of flow. Gardening, mentoring, hanging out with grandchildren, and stamp collecting could all be core pursuits. There's really no limit.
Moss found that happy retirees had an average of 3.6 core pursuits, while those who were unhappy had 1.9. Simply put, these folks had materially different experiences of retirement. And they key here is that these were pursuits that existed upon entering retirement.
In other words, don't wait until you call it quits on work to live a balanced and varied life. Start now, and your future self will thank you. Combine those core pursuits with a well-reasoned plan to claim Social Security with your spouse, and an examination of whether or not a reverse mortgage would be appropriate for you, and you'll be well on your way to a financially healthy, and emotionally satisfying retirement.
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