When is the right time to retire? For many of us, it is as soon as we have saved enough money for retirement.
What many people overlook, though, is that the two or three years before retirement require special preparations. These steps are essential to ensure that your money will last, that your healthcare expenses will be covered, and that you’ll enjoy your retirement with as little stress as possible.
The most important steps pre-retirement include:
- Building a budget: First, you will need to figure out what life in retirement will cost, including regular living expenses and extras such as travel or special purchases. If you’ve used a budget during your working years, you know that it’s a great tool for disciplining your spending. Budgets are even more important in retirement, especially if you’re not earning any new income.
- Planning for healthcare. Your budget should include your premiums, copays and other out-of-pocket healthcare costs in retirement. Medicare isn’t a free ride, and healthcare frequently ends up costing more than retirees anticipate.
- Evaluating your nest egg. Your budget will help you determine whether you’ve accumulated enough savings. If you haven’t, you’ll have to decide whether to adjust your standard of living in retirement, or accumulate more savings.
- Planning your investments. You’ll need to translate your nest-egg assets into a stream of income that will fund your expenses for as long as you live. That requires setting up an investment portfolio that is designed to generate appropriate levels of growth and income.
- Studying up on Social Security. Determining when and how to take Social Security involved weighing a complex set of variables. Understanding them can help you to maximize the amount of benefits you receive over your lifetime.
- Planning your estate. It’s important to make sure your estate plan is up to snuff while you are still fairly young. If you don’t have an estate plan, now is the time to hop on it. If you do have one, make sure that your trust(s), beneficiary designations, powers of attorney, will and living will are complete, up to date, and reflect your current wishes.
- Deciding what to do with yourself. The most fulfilling retirements usually consist of more than leisure activities like tennis or golf. It’s wise to start reflecting, before you retire, on how you will put your abilities to use in a meaningful way. You might end up volunteering, working part-time in an area you’re passionate about, or going back to school to study a subject you have always wanted to know more about.
Accumulating a nest egg is the toughest part of retirement preparation. But there is plenty of work to do in the two-to-three year stretch before retirement. Keep in mind that a qualified financial advisor can provide objective guidance, simplify complex choices and help you create a confidence-inspiring plan. Don’t hesitate to contact us if you would like assistance as you prepare for retirement.
