The oldest baby boomers have begun to turn 65 this year. High on their agenda should be signing up for Medicare. Boomers also have important Social Security and career choices to make. Here are seven tips for making retirement decisions at age 65:
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Sign up for Medicare on time. You can first sign up for Medicare during a seven-month window beginning three months before the month you turn 65. Sign up during the months leading up to your 65th birthday if you want your coverage to begin the month you turn 65. (If your birthday is on the first day of the month, your coverage can start as early as the first day of the prior month.) If you don't sign up for Medicare Part B during this initial enrollment period, your premiums may increase by 10 percent for each 12-month period that you delay enrollment. If you are still working and covered by a group health insurance plan at work, sign up within eight months of leaving the insurance plan to avoid the penalty.
Schedule your free physical. Beginning this year, Medicare provides a one-time free physical exam within the first 12 months you have Part B coverage by a doctor who agrees to be paid directly by Medicare. The visit may include a review of your health, vision and blood pressure screenings, education and counseling about preventive care services covered by Medicare, and referrals for treatment you may need. Other preventative services you may be able to get at no out-of-pocket cost include cardiovascular and breast cancer screenings, bone mass measurements, and flu shots.
Delay Social Security until next year. While Medicare eligibility for 1946-born baby boomers begins this year, they still will not qualify for the full amount of Social Security benefits they are entitled to. Boomers will have to wait another year, until age 66, if they do not want their entitlement checks to be reduced. Retirees who claim Social Security this year when they turn age 65 will get about 93.3 percent of their full monthly benefit, because they will be getting payments for an additional 12 months. Social Security payouts further increase for each year boomers delay claiming up until age 70.
Develop a retirement spending strategy. Before you plunge into retirement, develop a plan for how you will spend down your assets. Recognize that you will need to pay income tax on withdrawals from traditional 401(k)s and IRAs and withdrawals from those accounts become required after age 70½. Retirees who don't withdraw the correct amount will face a 50 percent tax penalty on the required withdrawal amount. Also, consider adding some inflation-fighting investments to your portfolio, such as Treasury Inflation-Protected Securities (TIPS), or some exposure to the stock market, commodities, or real estate. "You are probably better off trying to work a little bit longer, recover some of the losses in your retirement plan, and let the market do a little bit of the work," says Robert Baxter, CEO of Dryden Mutual Insurance Company in Dryden, N.Y., and a 1946-born baby boomer who will turn 65 in August 2011. "If you think about retirement at 65, you may end up living 20 or 25 more years and could outlive your income."
Keep your job skills sharp. Baby boomers who haven't saved enough to retire may need to spend several more years in the workforce. Make sure you stay on top of training and computer skills and continue to pursue new projects and opportunities at work. You don't want to get pushed out of the workforce before you are a ready to retire. Also consider offering to mentor younger employees and pass along your skills to upcoming workers within your organization. "We have all of this great experience and knowledge in a lot of different industries and everyone is going to retire and we're not passing it on to anyone," says Andrew Seybold, a 1946-born baby boomer in Santa Barbara, Calif., who runs his own mobile wireless industry consulting business. "I think we owe it to people following us to try to pass some of that information on to them."
Negotiate a new work schedule. Instead of retiring completely, many baby boomers are interested in working a more flexible and less demanding schedule. When asked about the life changes they have planned for the next few years, more than half (55 percent) of employed baby boomers turning 65 this year say they are interested in cutting back on their work hours, according to a recent AARP survey of 801 adults born in 1946. And about 15 percent of the retired baby boomers plan to go back to work. "People are going to use the guise of retirement to get a break, rest up, and essentially get ready for a new phase of life," says Marc Freedman, founder and CEO of Civic Ventures and author of the upcoming book The Big Shift: Navigating the New Stage between Midlife and Old Age. "Retirement is becoming a transition, rather than a destination. True retirement is going to get deferred to much later in life."
Plan your new life. Develop a plan for the activities you would like to try next. Baby boomers turning 65 this year say their top priorities for the next few years are maintaining their physical health (84 percent) and spending time with family (81 percent), AARP found. Other popular planned retirement activities include interests and hobbies (76 percent), doing things you have always wanted to do (74 percent), and travel (61 percent). Although you may need a rest after decades in the workforce, eventually you will want to channel your energies and abilities into a new project.
Since retiring in 1998, Doug Stanard, former CEO of bowling alley chain AMF Bowling, stays busy visiting his grandchildren and running a hobby farm in Columbia, S.C., where he hunts and has a pond stocked with fish. "Most people who stay active don't see themselves as growing old," says Stanard, who will turn 65 in November 2011. "It's only when you get out of the shower and you look in the mirror that you see yourself as 65."