Whether you’re saving for retirement or preparing for retirement within the next few years, here’s what you need to know to successfully slip into your golden years.
If you’ve been planning accordingly, you’ll be able to retire when you’re ready. Some people will ease into retirement slowly by continuing to work, but at a limited capacity. Others will retire fully one day and kiss the 9 to 5 grind good bye.
However you envision your transition into retirement going, there are a few important rules you should follow to help ensure it goes as smoothly as possible. Here they are:
- Be completely debt-free
Carrying debt into retirement is not ideal. You will want to make sure that before you stop earning your regular income that you pay off all your debt, including your mortgage. Don’t allow past purchases to eat into your fixed income. You will want to stretch your dollar further than ever before, and there is nothing quite like the peace of mind of not owing money to anyone.
- Plan for new activities
You’re sure to have a lot more time on your hands when you retire. How do you want to fill it, and what costs may be associated with your new activities? From travel to hobbies, you will want to account for any expenses and fees that come with the activities you plan to enjoy in retirement. Having a plan for how you will spend your days in retirement, as well as the financial resources to do so can make transitioning into retirement easier.
- Keep your estate plan updated
Prior to retirement, you will want to have a good, hard look at your estate plan and be clear on all your assets. Update your will and beneficiaries, assign someone as your healthcare power of attorney, and revisit a conversation with your durable power of attorney to review all your assets and wishes post mortem (detailed in a letter of intent). It will be nice to have your affairs in order prior to retirement. Your assets may have changed since you last updated your estate plan, as well as your wishes for your assets.
- Understand your health benefits and healthcare options
Healthcare is complex, and so you will want to know how your healthcare benefits are going to change once you officially retire. Aside from the financial planning that goes into making sure you’ve saved enough to cover twenty plus years of estimated healthcare costs, you will want to know what will change and how it will affect your standard of care. You will either retire with employee sponsored health care or Medicare (once you turn 65 years old), but do you know what that means for you? The time to find out is before you retire.
- Know how much retirement is going to cost you
We’ve covered some of the costs that you must account for in retirement, such as new activities and healthcare. But what about the overall cost of living on a fixed income? How much money do you need to cover all your expenses and not run out of money? Having a plan for how you are going to build up enough financial resources to cover all the costs you anticipate you will have in retirement will help make your transition smoother. In order to adequately plan, start thinking about what you’re planning for as early on as possible. If you are closer to retirement age, focus on what’s possible with the resources you have and a strategy for how to maximize your resources in retirement.
[Related content: Setting the Amount You Need for Retirement the Right Way]
Retirement doesn’t sneak up and bite you one day. It’s a process and something that you’ve likely been planning for decades. By following these five rules, you allow yourself the opportunity to double check that you are ready and prepared (financially) for this significant stage of your life.