When you spend the time, energy, and discipline solidifying a game plan for your golden years, getting ready for retirement can be exciting! As you prepare to wind down your last few working years (or months), there are a few things experts suggest you consider before you officially make the transition.
Make sure your budget is retirement-ready
Your retirement spending will likely differ from what you spent during your working years, so it’s recommended that you work with a financial professional to develop a detailed retirement budget.
Begin by determining what your retirement income will be, including how much you expect to receive from Social Security and what you plan to withdraw from your investments on a monthly basis. This way, you can avoid overspending during the early years of retirement.
A good rule of thumb for determining what you’ll need for a comfortable retirement is to make sure you’ll have the equivalent of 70-80% of your pre-retirement income, says Daisy Chan of Huffington Post.
Plus, don’t forget healthcare. While Medicare typically covers a portion of your healthcare expenses after retirement, you will still want to supplement your healthcare costs. Deciding how much to save for healthcare will depend on your health history, where you live and how often you visit your doctor.
Not to mention, changes in lifestyle may impact your healthcare regimen as a whole, including your hearing care. In fact, the shift to a “new normal” is one of the main reasons retirees upgrade their hearing aids.
Changes in your social life, exercise routine, or taking up a new hobby where you’re interacting with more people than you were pre-retirement could mean it may be time to consider updating your technology to accommodate your new habits.
Another step you can take? Test-drive your retirement budget while you’re still working. This way, you can get acclimated to new limitations slowly. And of course, eliminating your debt pre-retirement helps, too!
Take action while you’re still working
If you’re feeling like you’re not quite where you want to be financially, there are a few things you can do to throttle your savings. One thing you can take advantage of is catch-up provisions. “For those 50 years of age and older, the IRS allows a pre-tax deferral of $24,000 into an employer-sponsored retirement plan," says Daniel Zajac, partner with Simone Zajac Wealth Management Group.
Additionally, experts recommend maxing out your 401(k) contributions and, if plausible, working a few extra hours to maximize your pre-retirement savings.
Time your retirement strategically
While it may be tempting to celebrate the end of your working life in tandem with your significant other, experts recommend that you consider staggering retirement with your partner instead of retiring at the same time.
“It is fun to think of retiring together and immediately embarking on your elaborate travel plans, but if you stagger your retirement, more of your retirement assets will stay invested,” writes Carla Dearing, founder and CEO of online financial planning service SUM180. Plus, you and your partner can continue to take advantage of company insurance benefits and coverage—a significant asset as you cut down your spending in other areas.
Downsize strategically (and carefully)
Moving into a smaller house seems like an obvious way to give yourself a cash boost during your golden years. Just be careful when it comes to making this big decision, writes Ann Brenhoff of Huffington Post.
“There are substantial expenses involved in selling your house and buying a new one; paying a real estate agent a six percent commission is a big chunk of change,” she advises. Additionally, moving fees, air conditioning costs (if you’re moving to a warmer environment) and the cost of travel to see loved ones can all add up, turning a well-intentioned “downsize” into a lateral move instead of an upward one, especially if you’re currently mortgage-free.
Take a page from the experts at Investopedia, and carefully weigh your options for the best downsizing outcome.
Plan for post-retirement lifestyle changes
It goes without saying—you’re going to have a lot more time on your hands. And with more time for relationships, exercise and sleep, many of retirement’s unexpected lifestyle changes are a welcome adjustment.
But experts recommend thinking outside the golf course in terms of how you spend your time after retirement.
“The most successful people in retirement look to use their talents and passions to make a contribution,” writes Stewart Friedman, practice professor of management at Wharton and founding director of the Wharton Work/Life Integration Project. For many retirees, satisfaction comes in the form of a significant volunteer role or encore career.
There are a number of personality and career-related tests—like the Myers-Briggs and Clifton StrengthsFinder—that can provide additional perspectives on potential “encore careers” that could fit you well, or areas where you might excel that you hadn’t necessarily thought of before.
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