Your Easy-to-Understand Guide on Retirement Planning in 2022

Your Easy-to-Understand Guide on Retirement Planning in 2022

December 29, 2021

The road to retirement may seem rocky at best, especially with the ever-changing legislation. Although everyone’s retirement is different, 2022 is going to have some big differences from 2021 that will affect almost every retiree and retirement saver to some degree. But fear not, Agemy Financial Strategies is here to help simplify the process and help set you up for a positive retirement outlook.

The ultimate goal for so many is a wonderful and relaxing retirement. Ideally, the road to retirement would come off without any major snags and roadblocks in your plan. Unfortunately that is not normally the case and retirement plans always face challenges. This can be from the volatility of the markets, healthcare plans and the affordability factor or even the risks posed by annual inflation. In addition, you’re likely to face decades on a fixed income, and won’t necessarily have flexibility in your finances like you may have had in previous years. 

Retirement planning in 2022 can seem more difficult and complex. There are more volatile conditions than ever with healthcare costs going up, and uncertainty with Social Security. This is why it’s so important to be as prepared as possible before you’re retired and always make room in your planning for unexpected problems. Here is an easy-to-understand guide on retirement planning in 2022 to make sure you’re ready for anything the future may bring.

Review Your Current Financial Retirement Plan

Your life isn’t set in stone, and your financial plan shouldn’t be either. When’s the last time you tweaked yours? Where will your retirement money come from? If you’re like most people, qualified-retirement plans, Social Security, and personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement-income sources.

If you haven’t already, the first thing we recommend to do before creating a retirement plan is to review your financials. It’s important to assess the current retirement plan that is tailored to their goals and factors in things like cost of living, Social Security, and medical expenses. Paying off your debt before retirement to give you more financial flexibility. Financial planning is a process, and it’s one that requires proactivity to work well. While some of the other milestones listed here are good indicators that it’s time to review your plan, don’t wait until something happens to do something about it.

Planning Your Retirement Distributions

Saving money for retirement is only part of ensuring a financially secure future. The other half involves making smart decisions about withdrawing that cash.

The typical “Retirement Age” or the date at which you plan to retire is always established by the contribution plans defined in plan documents. The important thing to remember, this date cannot be later than when you or the retiring party reaches 65 years old. 65 is additionally the age of retirees where the defined benefit plan is calculated. 

To make it simple, when you reach this age of retirement, you have the option to receive your benefits in full. If it is a defined benefit plan, then your benefit will come in installments similar to salary paychecks.

There's a lot of retirement distribution strategies that can be used to stretch money further for a long retirement, and these can be combined and changed over time. Current market conditions, tax rates and a person's expected longevity are all factors that need to be considered.

Rather than pick a single method to use throughout retirement, talk to Agemy Financial Strategies about how to make the following retirement withdrawal strategies work together.

  • Use the 4% rule.
  • Take fixed dollar withdrawals.
  • Limit withdrawals to income.
  • Consider a total return approach.
  • Create a floor.
  • Bucket your money.
  • Minimize mandatory distributions.
  • Use account sequencing.

With the right professional guidance, selecting the right combination of methods can help ensure retirement accounts don't run dry.

Prepare for Inflation

A study by the National Endowment for Financial Education showed that 96 percent of Americans experienced four or more such “income shocks” by the time they reached age 70. As shown in 2021, inflation can really pick up at times that are unexpected and can severely impact anyone who isn’t prepared. It can also devastate a financial plan that relies heavily on fixed income investments like bonds. If you don’t have the option to re-invest your retirement income, inflation will hit your purchasing power hard. Over time, your dollars will be worth much less. 

What this means is you need a financial plan that already factors in for inflation. What we typically recommend is building up a financial plan that has growth assets included. This way your income has more potential to rise over time and you won’t be left making the same income you did for the last decade or more.

With prices rising at their fastest rate in decades, people in retirement or approaching it should take extra care to protect their savings.

Plan Healthcare Carefully

This may or may not come as a surprise; but retiring present day is equal to how much health insurance costs. If you’re someone that is putting off retirement until you’re old enough to get Medicare, double check that this is the cheapest alternative for you and look into all healthcare options. 

If you retire before age 65, you have several options for health insurance until you reach eligibility for Medicare. Which options you are eligible for and are best for you depend on your individual circumstances. You may enroll in the state health insurance marketplace, continue your employment-related benefits through COBRA or state continuation, enroll in your spouse’s health plan, or apply for Medicaid. The Affordable Care Act (ACA) has made health insurance coverage when retiring before age 65 a much less challenging situation. This is especially true for people with medical conditions or limited finances—both of which could be obstacles for early retirees seeking coverage in the pre-ACA era. 

While planning for retiring in 2022, it’s important to have an affordable healthcare plan. However, it’s not as simple to know what the options are and set up a plan as it was when you were employed and working with your employer on a healthcare plan that worked for you. The retirement income advisors at Agemy can help you achieve your healthcare goals in a safe and secure manner. 

Final Thoughts

A retirement plan in 2022 may seem like a daunting task, but financial advisors at Agemy Financial Strategies are here to help you put yourself and finances in the best position for success.

Finding the right financial advisor that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy Financial Strategies is here for your every step of the way to make some real progress on your journey to financial freedom this coming year.

After the stress of the end of a year has settled down for 2021, give us a call to get your retirement plan on track in 2022. Our team at Agemy Financial Strategies wishes you a happy, healthy, and prosperous New Year!