My Financial Transition Into Retirement

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With just three weeks left to retirement day, I thought I’d talk about my financial transition into retirement.  Changing from a wage-based spending pattern to a savings-based one is a huge challenge.  On top of that, I need to stretch my retirement dollars if I can.  So for better or for worse, here are my thoughts and actions so far.

The rest of this year

I chose to retire halfway through the calendar year.  It was for several reasons.  My 65th birthday is in June.  The fiscal year for my employer ends at the end of June and so does the contract on the health insurance and other benefits.

With all this, it just made sense to me to quit at the end of June.  And once all my accounts are settled, I can move my 403(b) into my IRA for ease of administration going forward.  Besides, when the 403(b) got switched from one company to another, I somehow couldn’t connect to watch the thing online.  With this switch I will have full online visibility and control.

At the end of June, I should have 6 weeks of vacation time saved, barring disaster.  And the value of that will be a nice severance pay.  With that and what I’ve saved so far this year, my part of the budget will be covered for the rest of the year.  No need to touch the savings accounts or retirement funds.

My part of the budget includes buying fuel oil for the winter ahead of time, paying property tax of over  $2500 a year, and paying for the homeowner’s insurance at the end of the year.

One of the advantages of living off cash on hand and the Social Security is that we won’t have added income without withholding done, so lower taxes too.  And that’s basically the first phase of my financial transition into retirement.

Savings accounts

Before I had really investigated how retirement works, I’d started three savings accounts.  One is for emergencies involving the house.  If the water heater dies, we can replace it.

Another one was to cover overdrafts originally, but that never happened so the money there is for other expenses that pop up.  The non-housing emergencies or cash-flow goof-ups, if you will.  Like when the car insurance is due and the tax refund isn’t here yet.

The third one automatically saves money from my paycheck so that I can  pursue activities after retiring.  Needless to say, I’d use that for emergencies too if I had to.  But it worked so well that after only a few years I have quite a bit stashed.  In fact, I believe I could fund a road trip around America with it and have money left over.

This one is in a credit union.  I felt it would be nice to have options like credit union membership in retirement in case we need to borrow money.

Social Security and Medicare

Another part of financial transition involves the federal government.  My Social Security was to start in July, which means they’ll start to pay it in August.  That’s one reason to have money ahead:  July bills.  With no regular check coming in, July is a no-money month for me, but we’ll still be eating and running electrical things.

Medicare started in June because that’s when my birthday falls.  But I kept my employer’s health insurance to pay my prescriptions and cover any emergencies with Medicare.  They have it all worked out between them; I don’t care how for one month.

To get my Part D going in time for July 1, when the work insurance is gone, I will have to apply in June.  Same for the Medigap plan I will get to cover the copays and coinsurance and all that.

I have a fair amount saved so will buy a Medigap policy.  That way. when I get sick or hurt or go for checkups and followups, I don’t have extra costs suddenly coming out of my grocery money.

The Part C, or Medicare Advantage, may be attractive to some.  However, I dislike hopping through hoops for managed care.  The bonuses generally don’t mean much to me either.

Part D does that too but if you shop you can get what you need for the most part.  But when Part D denies your medication and tells you to take some other one, Part D doesn’t lose if that puts you in the hospital.  Part A loses and so do you.  That’s one thing that needs to be fixed.

Anyway, I have the premiums for Part D and Medigap in the bank.  In the first week of June I’ll apply to insurance companies to have them ready for July.

Next year and onward

Later this summer I’ll work on moving my 403(b) into place.  That will set up the rest of my financial transition into retirement.  Next year I can take out enough money to pay the annually-paid bills and taxes from my IRA account.  Already I’ve sold off some shares in an index fund in my IRA so that there are a few years’ worth of cash in case of recession and market crashes.

By keeping the withdrawal from the IRA low, I’ll stretch how long I have it, incur lower taxes, and keep the budget in check.  We plan to live month to month on Social Security checks.

Since I still have a mortgage and car loan, money will be tight for several months while I pay the car off.  Then I will save most or all of that amount because it will make me feel safer.

Meanwhile, I’ll be busy with things that don’t cost a lot of money, mostly.  For a few things, like our trip if we take it, we’ll dip into the savings at the credit union, and rebuild that account.  I hope in future years to get us down to one car.  Our house loan will take a few more years.

So that’s what my financial transition into retirement looks like.  It’s the scariest thing so far because I know things change, but I feel I’ve covered the bases and should be able to survive in style.  Comments?



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