Due to the uncertainty the pandemic has caused, you may think it’s impossible to retire comfortably in 2022. Although COVID-19 has lead to inflation and other economic challenges, you can still exit the workforce this year and enjoy your golden years with some advance planning. To help you adjust your financial plans to our changing times, here are some tips on how to retire well in 2022.
How to Retire Well in 2022
Figure Out How to Cope With Inflation
The annual inflation rate from October 2020 to October 2021 was 6.2%, which is much higher than average. The cost of rent, gas, groceries, and other essentials has increased significantly during the pandemic. Dealing with spikes in inflation can be difficult on a fixed income. So you’ll have to make a plan for coping with rising costs without depleting your retirement nest egg.
Getting a part-time job can give you some extra income to offset the increased cost of living. Paying off some of your debt before you retire can reduce your monthly expenditures and make your retirement savings go further.
Learning to be frugal and stretch your pennies will also help you cope with rising expenses. Clipping coupons at the grocery store, shopping sales, and cooking more meals at home can lessen your food costs. Getting a more fuel-efficient vehicle and combining short trips can help you use less gas and reduce your fuel costs.
Additionally, it’s important to make sure your investment strategy isn’t too conservative. If you invest heavily in low-yield assets like bonds, CDs, and money market accounts, your money might not grow fast enough to keep up with inflation. It may help to speak with a certified financial planner to get advice on the right asset allocation for your situation.
Research Health Insurance Options
Before you can retire, you’ll need to explore your health insurance options and find the right plan for you. If you’re nearing 65, you can enroll in Medicare three months before your birthday. Make sure you do your research to determine whether you want to enroll in original Medicare or a Medicare Advantage plan.
The biggest difference between these two options is that Medicare Advantage has a maximum out of pocket limit, whereas original Medicare does not. So a Medicare Advantage plan may be better for you if you’re worried about an unexpected health crisis depleting your retirement savings. Some employers offer health coverage to retired workers to help supplement their Medicare plans. So it may be worth contacting your company’s human resources department to find out if your employer has any of these benefits.
Getting healthcare coverage as an early retiree can be more challenging. You’ll need to look for affordable options to cover you until Medicare kicks in. Your employer may have group health insurance options for early retirees not yet eligible for Medicare. You may also be able to get coverage through a spouse or the marketplace, but plans can be expensive if you don’t qualify for subsidies. If you have a health savings account, you can use the money you’ve saved up to help offset your medical expenses.
Find Your Purpose in Retirement
Many retirees find themselves bored and lacking purpose after they leave work. The pandemic has also caused many retirees to feel isolated and lonely because of lockdowns and being unable to see family and friends. Experts say that boredom and loneliness can lead to reckless spending during early retirement.
That’s why it’s important to find low-cost hobbies to occupy your newfound free time and give you a reason to get up in the morning. If you have a full calendar of activities, you won’t blow your budget on mindless forms of entertainment like online shopping.
Are you planning to retire in 2022 or are you holding off to pad your savings more? Let us know in the comments section below!
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