Five steps to help you achieve retirement balance
Are you ready to retire? How do you know if you’re ready? How do you get ready?
Now that you’re getting closer to retirement, you've got questions—and we've got answers. Following these five steps can help you get closer to achieving retirement balance.
Step 1: calculate your retirement spending needs
The retirement planner at myplan.johnhancock.com projects your personal expenses and your retirement income for each year of your retirement
Let's start with spending.
After you log in to your retirement account at myplan.johnhancock.com, click on "Let's go!" You’ll see your projected expenses in three categories:
Your projections are based on information you provide us in the retirement planner. The more information you provide, the closer we can estimate your spending needs.
Picture your retirement
Knowing how you want to spend your time in retirement can help you figure out your retirement expenses. The retirement planner can help you by showing you a personalized projection of your retirement expenses. Think about these questions as you model different scenarios in the planner:
- When do you want to retire?
- How does your retirement date affect your savings and spending?
- What will you do in your free time?
- Will you get a part-time job or start a second career?
- Where will you live?
Look at your health insurance options
Before you leave your job, find out about options for health insurance—what’s offered through your company and what’s available through independent medical plans, Medicare, and Medicaid. Ask about monthly costs, deductibles, and limits and the coverage for wellness visits, specialist visits, medications, and treatments.
Put together a budget
Some of your costs will stay the same, but some will be different. You'll see in the retirement planner that when you retire, your spending is higher in the beginning—as you travel, eat out, and are generally active. Your spending then slows down for a bit, then goes up again, driven by healthcare expenses. Use the annual spending estimates in the planner to guide your budgeting.
Pay down your debt
Consider paying down your debt to free up cash in retirement.
Debt you may want to eliminate before retirement
|Credit cards||Student loans|
Review Tip 1
Consider how these factors may affect your future spending
Use this worksheet to keep track of it all
Step 2: map out your retirement income sources
The retirement planner can also help you add up all your sources of retirement income. It starts off with your John Hancock retirement plan and an estimate of your Social Security payment, and you can add others
Potential retirement income sources
Include your savings accounts, CDs, and other accounts.
Do you have mutual funds, money market funds, brokerage accounts, or other investments?
You could have more than one: 401(k), 403(b), SEP, Keough, IRA, cash balance, or traditional pension plan, and others.
Retirement household income
Will you or your spouse work part time? Do you have rental property or any other income sources?
Do you expect to inherit anything from a family member?
The retirement planner includes an estimate of your Social Security payments.
Review Tip 2
Your retirement income
Step 3: bridge the gap between spending and income
The retirement planner will show you if there’s a difference between what you’re projected to have and what you’re projected to need
If your retirement plan allows you to contribute, visit our retirement planner to model strategies that can help increase your savings and close the gap.
Still need to save more?
Once you turn 50, you can save more in your retirement plan—in 2021, you can save up to $26,000 in certain workplace plans, including 401(k), 403(b), and profit-sharing plans. Look at your budget and find ways to save more. Cutting out one grande cappuccino a week could free up $234 per year for savings. Look for small changes that can add up to big savings.
Think about your investment strategy
The more your investments earn, the less you may need to set aside for retirement, so make sure your investments are working for you. Many experts recommend that the closer you get to retirement, the less risky your investments should be. Be sure you balance potential risk with potential reward and consider how far away you are from your target retirement date or the date you plan to begin withdrawing money.
Review Tip 3
Check in on your investments
Consider a change in your plans
Step 4: create a plan to access your money in retirement
Know your retirement plan options
Check with your employer to find out your plan’s rules for withdrawing from your retirement plan. Some plans allow you to take a little at a time, some allow you to set up a recurring withdrawal, and some require that you take it all out at once. You may also have the option to leave your savings in the plan until you need to withdraw. Check your plan rules and become familiar with what your plan allows.
If you take your money out of your retirement plans, you may be able to roll it into another qualified plan or an IRA, or you can take a cash distribution.¹
1 There are advantages and disadvantages to all rollover options; you are encouraged to review your options to determine if staying in a retirement plan, rolling over to an IRA, or another option is best for you.
Leaving your money in the plan
|Rolling your money into another qualified plan or an IRA||Taking a cash distribution from your plan|
|When you leave your savings in your plan, you still have access to the website and all its tools, as well as your plan's investment options.||Generally, if you roll the funds directly into another qualified plan or an IRA, you continue to enjoy tax-deferred savings. You can check with your own financial professional or call one of ours at 888-695-4472 to help you decide.||In most cases, if you take the money out of the account, you’ll owe income tax on the distributed amount. If you’re younger than 59½, you’ll likely also pay a 10% early withdrawal penalty.|
Create a withdrawal—or drawdown—strategy
There are a few methods that can help you figure out how much to withdraw every year. What they all have in common is that they try to help you withdraw your money in a way that balances your need for income with the need to make your money last for the length of your retirement. In addition to accounting for longevity, they also take inflation into consideration.
|John Hancock's retirement planner||Earnings only|
|Using the projections from our retirement planner at myplan.johnhancock.com, you can estimate how much you may need each year of your retirement for basics, healthcare, and nonessentials. It’s all done for you—and you make adjustments if you’d like.²||Depending on your investments, you could choose to live on the income (interest and dividends) that your assets potentially generate. This allows you to continually pull income without eating into your principal.|
|Systematic withdrawals||Time segmentation (bucket) method|
|With this method, you withdraw the same amount each year, adjusting the amount for inflation. You’ll need to estimate how long you expect your retirement to be and determine the percentage that you’ll be able to withdraw each year to make it last. One common method is to base your withdrawal percentage on the required minimum distribution (RMD) formula for rollover IRA or 401(k) savings.||This method has you divide your retirement years and your assets into different segments, or buckets. Each investment bucket would correspond to a time period, generally with less risky investments (including fixed income and money market) funding the earlier years and risker assets (stocks) held for later years. This would also require that as you move through retirement and your buckets, you adjust the risk profile of future buckets as they draw closer to use.|
2 The projected retirement income estimates for your current John Hancock accounts, future contributions, employer contributions (if applicable), and other accounts set aside for retirement used in this calculator are hypothetical, for illustrative purposes only, and do not constitute investment advice. Results are not guaranteed and do not represent the current or future performance of any specific account or investment. Due to market fluctuations and other factors, it is possible that investment objectives may not be met. All investments carry a degree of risk, and past performance does not guarantee future results.
Review Tip 4
Step 5: plan for the next phase
Make sure you’ve planned for all aspects of your next phase of life
- Do you have a will that lays out where your assets will go? If you don’t, the courts will decide—and they may not make the same decisions you would. Talk to a lawyer about creating a will and estate plan.
- Do you have living will and healthcare proxies so that your loved ones know what to do if you can’t make a decision about your own healthcare? Talk to your lawyer to make sure your wishes are properly covered.
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