The steps you can take to give yourself peace of mind when entering your retirement years
After spending decades in the workforce, everyone deserves to experience a carefree retirement, but the road to achieving this requires thoughtful planning and foresight.
The decisions you make now, and particularly in the final decade before retirement, will ultimately have an impact on your life and lifestyle in retirement. Because of this, it’s important that before you clock out at work for the last time and start checking off the items on your bucket list, you’re prepared.
To help, here are 10 steps you can take to enter retirement with peace of mind.
1. SET GOALS
For many, retirement is the goal. But what are your goals the moment after you retire? Maybe you’d like to travel more, upgrade your vehicle, or buy a second home. It’s key that you sit down with your spouse before retirement and set these goals in advance so you can have an idea of how much pursuing them will cost and how you can adjust your current budget to achieve them.
2. ASSESS YOUR FINANCIAL PLAN
If you don’t have a financial plan, you will need one — especially in the 10 years prior to retirement. Your plan is like a blueprint for every financial decision you’re going to make when working toward a carefree retirement. Working with a financial professional to build or revise an existing plan can give you a better understanding of where you are at and help you make changes when necessary.
3. CREATE A REALISTIC BUDGET
Before retirement, have a good understanding of your budget and spending now, and how much you’ll likely be spending in the future. Is the structure of your budget now going to provide you with what you’ll need to reach a carefree retirement? Will you need to adjust your savings and spending once you reach retirement? While everyone’s budget is different, a general rule of thumb is to have a cash reserve of 9 to 12 months of living expenses as an emergency fund.
4. EVALUATE INVESTMENT ALLOCATION
Ensure that in the final years leading up to retirement, your asset allocation is in line with the distribution strategies you’ve planned for. While a person’s risk tolerance generally decreases as they approach retirement, it ultimately depends on your financial plan and how much you will be relying on your investment portfolio for cash flow in retirement.
5- ASSESS YOUR TAXES
As retirement approaches, it’s important to assess your tax plan with your financial team. Minimizing your tax burden is important during this transition. Diversification within your tax buckets can help you achieve that. That may mean assessing each of your tax buckets and choosing to contribute to a variety of taxable, tax-deferred, and tax-free accounts that you can withdraw from later on.
6. ANALYZE YOUR DEBT PICTURE
Eliminating debt is very important leading up to retirement, and you should aim to eliminate all high-interest debt like student loans and credit card debt. There are some cases where it may make sense to carry some low-interest debt into retirement, like if you have a low mortgage rate, but ultimately heading into retirement with limited debt can reduce stress.
7. CONSIDER HEALTH INSURANCE
Taking care of your health is essential, especially in retirement, and your health insurance is a piece of that. Healthcare can become one of your largest expenses in retirement, so you should estimate what your needs may be in retirement and explore savings options like a Health Savings Account (HSA). If you are planning on retiring before 65 years old — the age you can enroll in Medicare — look into your options for health insurance when you leave the workforce.
8. SOCIAL SECURITY ANALYSIS
The earliest you can collect Social Security is 62 years old, but you are not able to access full Social Security benefits until age 67 (if you were born in 1960 or later). If you delay accessing Social Security benefits beyond age 67, you become eligible for delayed retirement credits that will increase your monthly benefit, until you reach age 70. When weighing your options, Emerj360’s financial professionals can help you determine the most advantageous path to take.
9. UPDATE YOUR ESTATE PLAN
You should have an estate plan in place and review it shortly before retirement to ensure it is up to date and true to your wishes. This means checking all of your beneficiary designations, and as a part of that, revising the titling of your accounts and assets if needed. It’s also beneficial to introduce your children to your financial team and keep them informed on the plan for your estate.
10. STAY ENGAGED
A piece of our identity often becomes tied to our careers, which can make leaving the workforce a difficult transition. Before you retire, have an idea of how you’d like to stay active and be engaged. That might mean pursuing a hobby or getting involved in a charity and volunteering your time toward a cause you care about. Having a plan for how you will stay engaged will help you maintain your sense of purpose and experience a happier retirement.
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