As exciting as retirement can be, it’s important to avoid jumping hastily into this new life stage. Before you retire, you’ll want to take some steps to prepare. Otherwise, you might find yourself running into issues like affording the retirement lifestyle you envisioned or not finding your day-to-day routine as fulfilling as anticipated.
In this article, we’ll cover three important things to do before you retire so you can put yourself in a better position to enjoy the retirement you worked so hard for.
1. Crunch the Numbers
One of the most important things to do before you retire is to crunch the numbers. Doing so can give you a better idea of what your finances will look like when you’re no longer working.
This step should include calculating amounts such as the expected retirement income coming from your retirement accounts. Instead of just looking at the balance, you can use online calculators to see what the amount might translate to in monthly or annual retirement income.
Crunching the numbers will also mean calculating your expected Social Security benefits to see how they can supplement your investment and savings accounts and any other sources of retirement income. The Social Security Administration offers online calculators.
Making these calculations before you retire can help you make important retirement planning decisions. These can include whether to take Social Security early at age 62, wait until your full retirement age (this number increased from age 65 up to age 67, depending on when you were born), or start it at age 70 to maximize delayed retirement credits.
2. Think About Your Retirement Lifestyle
Another important step before you retire is to envision what your retirement lifestyle might look like, rather than waiting to figure it out in retirement.
Having a retirement lifestyle in mind ahead of time can go hand in hand with crunching the numbers. If you want to travel a lot, for example, then it’s important to compare what those costs might look like compared with your projected retirement income. If there’s a shortfall, you can problem-solve, such as considering part-time work to earn some extra money and enable your retirement travels.
Plus, you want to get a clear sense of when you will retire. Suppose you want to retire very early. In that case, it’s essential to understand that you generally need to wait until age 59 ½ to take penalty-free withdrawals from tax-advantaged retirement accounts like a 401(k) or the gains from a Roth IRA. So, you may need to rely on other sources of income if you want to retire that early and avoid racking up credit card debt to fund your lifestyle.
Thinking about your retirement lifestyle before you retire can also help you avoid becoming bored in retirement. You might test out some new areas while you’re working, such as signing up for an online class to decide if you will enroll in a more comprehensive course in retirement.
Or perhaps you’ll want to get involved with philanthropic work, in which case you might want to volunteer with a few organizations now to learn where you will commit your time later on.
That’s not to say that you must have everything 100% planned out or that you have to stick to your initial plan—but the advance work can make the transition easier.
3. Talk to a Financial Advisor
Talking to a financial advisor before you retire can help you pull together the many aspects that go into this transition. From handling required minimum distributions to planning for health care costs like supplementary health insurance and long-term care, there’s a lot that goes into building a financial plan that can work for all your years of retirement.
The right financial advisor can help you prepare for wealth management issues that might otherwise derail your retirement plan, like market downturns. Plus, talking with a financial advisor can help you firm up your legacy plans before you retire, such as how you will leave an inheritance for your children or make substantial charitable contributions.
Our Plantation, FL-based advisory team works with pre-retirees and retirees to help them enjoy successful retirements as part of their comprehensive financial planning.
Schedule a complimentary consultation with one of our fee-only financial planners to discuss your personal situation.