June 01, 2016
You're ready for retirement, but are your finances?
- Ramp up your savings. Don't have a retirement fund? Better late than never, so start now. If you have one, now is a great time to pad it. For instance, consider taking advantage of catch-up contribution opportunities with your IRA and 401(k) accounts. You can also work on trimming other expenses so you have more of your budget available for saving.
- Reduce your debt. Taking control of your debt can set you up for a better retirement experience. Aim to pay off your mortgage and any other large credit balances before you retire from your day job.
- Boost your emergency fund. Unexpected expenses can feel particularly painful when you're on a fixed income. Soften the potential blow by building up a savings account or money market account that you can tap into, instead of going into debt.
- Investigate post-retirement healthcare costs and long-term care insurance. Healthcare can be a major retirement expense, so do what you can now to explore your options and plan the best coverage for your needs. If you know you'll need a pricey treatment (maybe you've been putting off knee replacement surgery, for example), consider having it done under your current insurance policy. Besides your own health insurance company, here are some helpful resources: HealthCare.gov (information on the Affordable Care Act), Medicaid.gov, Medicare.gov and LongTermCare.gov.
- Investigate your Social Security options. You have choices when it comes to deciding at what age you start receiving Social Security benefits. The Social Security Administration website provides detailed information to help you make a wise decision, including a calculator to determine your full retirement age, a benefits planner and an online benefits application form.
- Estimate your retirement “paycheck.” Understand the minimum distribution requirements of your retirement accounts and factor in any other income you may expect during retirement, such as Social Security or a part-time job. Calculate how much you'll likely have to live on each month. Then create a retirement budget based on those numbers. Consider giving the budget a trial run before retirement to see if you need to cut back on expenses or make other adjustments.
- Define your retirement goals and dreams. Do you want to travel the world, try new hobbies or stay home with your grandkids? Identify your objectives and then factor them into your budget and financial preparations.
- If moving is on your list, check out locations. Make sure to explore the financial aspects of any possible new locale, such as local property and income taxes, as well as the overall cost of living. Also investigate community amenities, from entertainment options to the nearest grocery store and healthcare facilities.
- Brainstorm ideas for spending your days. Surprisingly, having all that free time sometimes doesn't feel as good as you would expect. So, think about what you might want to do, whether it's volunteer work, hobbies or a part-time job. (In fact, your hobbies or other specific skills could even turn into a part-time job!)
- Discuss retirement with a financial advisor. Meet with a financial advisor and start with a basic review of your assets and make any necessary adjustments to your portfolio for this stage of life. For instance, as you get closer to retirement, you may want to shift your asset focus from growth to capital preservation. Plan to stay in regular contact with your advisor and work together to develop a plan that will not only help you transition into retirement, but set you up for financial comfort and confidence for the retirement years ahead.
For how hard you’ve worked, you deserve to enjoy your retirement. The best way to ensure a comfortable retirement and a quality of life that meets your expectations is to plan for it. Follow these steps and you should be able to enjoy your new free time with peace of mind.