It’s never too early to start thinking about retirement. In fact, the more you do now, the easier retirement will be. Retirement can be a daunting prospect if you don’t have a plan. For example, do you know how much you’ll get from Social Security? And, will your money outlast you?
You can make sure that you have the money you need to live financially independent in retirement by planning ahead.
This article will cover the 27 things to do before retirement. While much of this can be done on your own, a lot of it should be done alongside a professional.
Consider Your Housing Needs
Those about to retire should start thinking about whether they want to downsize or move to a retirement community. It’s best to consider your options and decide what is best for you. If you plan on staying in your home, it’s often best to make sure that it is paid off before you retire. If not, you’ll be stuck with a mortgage payment that could put a damper on your retirement plans.
It might also be a good idea to consider whether you want to move to a retirement community. These communities have many benefits that can make retirement more enjoyable. For one, you’ll be surrounded by people in the same stage of life as you. This can provide companionship and support during retirement. Retirement communities also offer social and recreational activities to keep you active and engaged.
Create a “Retired” Budget
Once you retire, your income will likely change. You will probably have less income if you’re no longer working.
The budget should include all your expected retirement expenses, such as housing, food, transportation, and healthcare. But don’t forget birthday and anniversary gifts, presents during the December global holidays, or even the odd gift to yourself.
Also, don’t forget to include a cushion for unexpected expenses. And don’t forget to account for inflation. These days, prices always seem to go up. So, you’ll need to make sure your retirement income can keep pace.
Calculate the Expenses You’ll Have to Make Once You Retire
One of the things to do before retirement is to calculate the expenses you’ll have once you retire. These expenses include things like housing, food, transportation, and healthcare. Indeed, costs will be different than they are now.
Consider the 50-30-20 rule. This rule suggests spending 50% of your income on essential expenses, 30% on non-essential expenses, and 20% on savings and debt repayment.
Save Like Crazy
Retirement planning is all about saving as much money as possible now to have enough money later. The sooner you start saving, the more time your money has to grow. If you’re not already doing so, start contributing to a retirement account as quickly as possible. Social security will only get you so far. So, the earlier you start saving, the less you’ll need to save each month to reach your retirement goals.
Suppose your employer offers a retirement savings plan, such as a 401(k), make sure you’re contributing enough to take advantage of any employer matching contributions. Employer matching contributions are free money that can help you reach your retirement goals faster.
Even if you’re not able to contribute a lot each month, every little bit helps. The key is to start saving now and be consistent with your contributions.
Top Up Your Emergency Fund
An emergency fund is separate savings account that you can use for unexpected expenses.
Experts agree to save 3-6 months’ worth of money for living expenses. This will help you cover unexpected costs, like medical bills or home repairs.
You can open an emergency fund account at a bank or credit union. And, be sure to look for an account with low fees and a reasonable interest rate.
Keep Adding to Retirement Savings
Just because you’re retired doesn’t mean you should stop saving for retirement. If you can do so, keep contributing to your retirement savings. If you have earned income, you can even continue contributing to your traditional and Roth IRAs.
Together with your financial advisors, you can determine the best time to start withdrawing from your retirement savings accounts.
Get Out of Debt
Debt can be a retirement killer. If you’re carrying a lot of debt, it’s essential to get it paid off before retiring. Otherwise, you’ll be stuck with monthly payments that could damage your retirement plans.
One of the fastest ways to get out of debt is to start by reducing your credit card usage. Doing so will reduce your monthly expenses and allow you more money to save for retirement.
There are a few ways you can reduce your credit card usage.
- Use cash instead of credit,
- Transfer your balance to a lower interest rate credit card (To save on interest), and
- Set up a budget and stick to it.
You can use the debt snowball or debt avalanche method to pay off debt. With the debt snowball method, you first focus on paying off your smallest debts. With the debt avalanche method, you first focus on paying off your debts with the highest interest rates.
Seek Loan Forgiveness If You Still Have Federal Student Loans
If you still have federal student loans, you may be eligible for loan forgiveness. Loan forgiveness is when the government pays off your student loan debt. You may qualify for loan forgiveness if you work in a public service job or are disabled.
To learn more about loan forgiveness, visit the Federal Student Aid website.
Plan for Changes in Your Medical Insurance
If you’re retired or nearing retirement, it’s essential to plan for changes in your medical insurance. You may be eligible for Medicare, but it’s vital to understand your coverage and its cost. Also, be aware of the gaps in Medicare coverage to plan accordingly.
You may also want to consider purchasing a supplemental insurance policy to help cover your health care costs.
Improve Your Social Security Knowledge
If you’re retired or nearing retirement, it’s essential to understand how Social Security works. This includes knowing when to start taking benefits and the amount of fixed income you can expect from Social Security benefits.
Social Security provides a fixed income for your entire life that can help cover your living costs. The amount is based on your earnings history. The more you’ve worked and the higher your income, the more significant your retirement benefits will be.
Also, Social Security can start sending your fixed income benefits as early as age 62. But if you wait until your full retirement age, which is between 66 and 67 depending on when you were born, your benefits will be larger.
For each year you delay taking benefits past your FRA, your benefits will be increased by about 8%. So if you wait until age 70 to start taking benefits, your benefits will be about 32% higher than if you had begun taking them at FRA.
You can get all the information about Social Security benefits at the official website, www.ssa.gov.
Learn How Medicare Works
Medicare is a health insurance program for people 65 and over. If you’re retired or nearing retirement, it’s essential to learn how Medicare works. This includes knowing what’s covered and what’s not covered.
Medicare is a helpful program because it covers some healthcare costs that people may not be able to afford on their own. This includes hospital stays, doctor visits, prescription drugs, and preventive services.
Medicare also offers peace of mind. It’s one less thing you have to worry about when it comes to your healthcare. And you don’t have to worry about losing your health insurance if you retire.
You can get more information about Medicare at the official website, www.medicare.gov.
When It Comes to Retirement, Ask the Pros
Getting qualified, professional advice at any stage of one’s life is always a good idea. Professionals should be able to use their experience to take a holistic approach to your financial house. As a result, they can “look ahead” to ensure you’re well prepared for retirement.
Book a Meeting With Your Financial Advisor
One of the best things you can do before retirement is to get professional retirement advice. A financial advisor can help you with retirement planning. They can crunch the numbers and help you develop a retirement plan that makes sense for you.
When choosing a financial advisor, look for someone who is a Certified Financial Planner (CFP). A CFP is a professional who has taken extra coursework to become certified. They must also adhere to a code of ethics.
A financial advisor can also help you with other retirement-related issues, such as investment planning, estate planning, and even life insurance coverage.
To get started, schedule a retirement checkup. This is a meeting with your financial advisor to ensure your retirement plan is on track.
You can find a financial advisor by searching the Financial Planning Association website.
Take Stock of Your Assets & Liabilities
Before you can start planning for retirement, it’s essential to know what you have to work with. Take stock of your assets and liabilities to get a clear picture of your financial situation.
This will help you determine how much income you’ll need to cover your expenses and live the lifestyle you want in retirement. It will also give you a better idea of when you can retire and how much retirement savings you’ll need.
Adjust Your Portfolio for Income
If you’re retired or nearing retirement, it’s critical to make sure your investment portfolio is income-focused. This means investing in assets that will generate retirement income, such as bonds and dividend-paying stocks. It goes without saying that passive income sources will be a key driver in your retirement budget.
You can work with a financial advisor to help you adjust your asset allocation for income. They can help you choose suitable investments for your retirement goals.
Determine Retirement Withdrawals
Another critical retirement number to be aware of is your retirement withdrawal rate. This is the percentage of your retirement savings you can safely withdraw each year without running out of money.
There are a few different ways to calculate your retirement withdrawal rate. But a good rule of thumb is to withdraw no more than 4% of your retirement savings each year.
Crunch Your Retirement Numbers
One of the most important things to do before retirement is crunching your retirement numbers. This includes estimating how much monthly income you’ll need and how long your retirement savings will last.
You can use retirement calculators to help with this. Or you can work with a financial advisor to get a more accurate estimate. Either way, it’s essential to have a good understanding of your retirement numbers before you retire.
Have a Long-Term Care Plan
One of the biggest retirement concerns is how to pay for long-term care. Long-term care costs can quickly eat away at your retirement savings. If you’re not prepared, you could have to sell your home or dip into your retirement account to pay for care.
A long-term care insurance policy can help you cover long-term care costs. If you’re healthy and purchase a policy while you’re young, you can get coverage at a much lower price.
Estate planning means having a plan for distributing your assets after you die. As a result, it’s an integral part of retirement planning. Your estate plan will determine what happens to your assets after you die. If you don’t have an estate plan, your assets will be distributed according to your state’s intestacy laws.
An estate plan can also help you preserve your assets and minimize taxes. A well-crafted estate plan can help you ensure that your assets are distributed according to your wishes and that your loved ones are taken care of after you’re gone.
There are a few steps to consider as part of your estate planning:
- Make a will. This document specifies how you want your assets to be distributed after you die.
- Review your life insurance coverage. Life insurance may or may not be needed in retirement. So, it’s worth considering!
- Create a trust. A trust is a legal entity that holds your assets for the benefit of another person.
- Name a beneficiary for your retirement accounts. This is the person who will receive your retirement account balance when you die.
- Review your life insurance policy. You may need to adjust your coverage as your needs change.
Brush Off the Life Insurance Policies
If you have life insurance policies, now is the time to look. Make sure you have enough coverage to meet your family’s needs in the event of your death. You may also want to consider changing your beneficiary if your situation has changed.
Now is also an excellent time to review your will and make sure it reflects your current wishes.
Pay Attention to Taxes in Retirement
Retirement taxes can be a big surprise for many people. If you’re not prepared, they can take a big chunk out of your retirement income. You can do a few things to save money on taxes in retirement. This includes taking advantage of tax-advantaged retirement accounts, such as a 401(k) or IRA.
You can also consider moving to a state with lower taxes. This is especially beneficial if you live in a high-tax state and are retired or nearing retirement.
There are a few states that have especially low taxes for retirees. In particular, Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Washington do not have state income taxes.
Always talk with a qualified tax accountant for the best advice.
Reduce Home Expenses
There are two quick ways to reduce home expenses.
First, if you have a mortgage, you may be able to reduce the payment by refinancing. This is especially true if interest rates have gone down since you first got your mortgage.
Refinancing can lower your monthly payments and free up cash for retirement. It can also help you pay off your mortgage faster. Just make sure you compare the refinancing costs with the savings you’ll get.
And remember, if you do decide to refinance your mortgage, be sure to do it before retirement, as it could be a challenge getting approved once retired.
Another way to free up cash for retirement is to downsize your home. This can be a great way to reduce your monthly expenses. You could sell your large family home and move into something smaller.
Reduce Costs on Transportation
One way to reduce your costs on transportation is to sell your car. If you live in an urban area, you may not need a car anyway. You can use public transit, ride-sharing, or biking to get around.
Public transportation can benefit you in many different ways. Public transportation is a great way to save gas and car maintenance costs. It’s also a great way to reduce your carbon footprint.
Biking is a great way to get around town. It’s a healthy, eco-friendly mode of transportation that saves you money on transportation costs.
Biking can help you stay in shape, and it’s a great way to explore your city. It’s also a great way to keep your gas and car maintenance costs low.
And, finally, it’s a great way to meet new people and make new friends.
Reduce Utility Costs
One way to reduce your retirement costs is to reduce your utility costs. There are a few ways you can do this.
You can install solar panels to generate your own electricity. Solar panels can save you money on your electric bill, and they’re good for the environment.
You can also insulate your home to reduce your heating and cooling costs. This is a great way to save money on your utility bills.
Finally, you can reduce your water usage to save money on your water bill. You can do this by installing low-flow showerheads and toilets. You can also water your plants during the cooler hours of the day to reduce evaporation.
Other Things to Do Before Retirement
Planning for retirement is not just about planning to save and spend. Rather, you’ll also want to enjoy it. Here’s a few ways to make your retirement years all that much better.
Build a Strong Circle of Friends
One of the best things you can do for your retirement is build a strong circle of friends and family. Friends and family can provide support and companionship during retirement. They can also help you stay active and involved in your community.
Having a strong network of friends can also help make retirement years that much more enjoyable. So start building those relationships now, and you’ll be glad you did when retirement rolls around.
Choose a Hobby You Love
One of the best things you can do before retirement is to choose a hobby you love. A hobby can help you stay active and engaged. It can also provide a creative outlet.
Some hobbies you may want to consider include:
- Cooking or baking,
- Knitting or crocheting,
- Collecting, or
Choosing a hobby can help you make the most of your retirement years. It can also help you stay connected to your passions.
Schedule Your Retirement With Your Partner
If you’re married or in a relationship, you should schedule your retirement with your partner. This can help you both transition into retirement and avoid conflict.
Some things you’ll need to discuss with your partner include:
- A retirement date,
- How you’ll spend your time in retirement,
- What your retirement budget will be,
- Where you’ll live in retirement, and
- Your retirement goals.
Scheduling your retirement with your partner can help you both enjoy a smooth transition into this new phase of life.
Decide What’s On Your Bucket List
One of the more fun things you to do before retirement is deciding what’s on your bucket list. A bucket list is a list of things you want to do before you die.
Some things you may want to put on your retirement bucket list include:
- Travel to new places,
- Learn a new skill or hobby,
- Spend more time with family and friends,
- Volunteer or give back to the community,
- Spend more time outdoors, or
- Get in shape or start a new fitness routine.
Creating a retirement bucket list can help you make the most of your retirement years. It can also help you stay motivated and active.
Retirement may seem like a long way away, but it’s never too early to start planning for it. Preparing for retirement means making sure you have enough money saved up today to live comfortably in the future.
As discussed in this article, it’s crucial to think about both the financial and emotional aspects of retirement to enjoy your retirement years to the fullest.
This article originally appeared on RickOrford.com and was republished with permission.
Author: Rick Orford
Bio: Rick is a two time best selling author (his books have become Wall Street Journal, USA Today, and Amazon best sellers), investor, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.