The things you do now could guarantee a comfortable retirement in the future! Here are 8 things to do before your retire that will help you prepare for the retirement you desire.
1. Create a Budget Based On Your New Income
If you’re like most people, you don’t like the idea of a budget, but at this stage of your life, a budget is really just a plan for your financial future. It’s a way of projecting what will happen with your money, and it is the best way to avoid serious problems after you retire.
Expect your monthly expenses to change when you retire. All your work related expenses (transportation to work, clothes, lunches, etc.) will cease. Depending on your work, those expenses can be significant.
As you get older, other expenses can increase. Depending on your age when you retire, Medicare may cover many of your medical bills but not all. You’ll probably want to buy one of the supplemental plans that are available.
2. Save Like Crazy
Many of us haven’t saved enough for retirement. Research suggest that you have eight times your annual salary saved by the time you reach age 60. Even if it means sacrificing, now is the time to do everything in your power to save.
You may even want to consider a part-time job. Giving up weekends and days off is tough, but tougher still is retiring when you don’t have sufficient income to enjoy it.
3. Estimate How Much Retirement Income You’ll Have
While we all look forward to not having to show up for work, let’s face it, we will miss the paycheck. That’s why it’s vital to estimate how much income you’ll have in retirement.
For many retirees, Social Security is a major element of their retirement income. Although it was never meant to be the sole source of a retiree’s income, many try to live on Social Security alone.
To estimate how much you’ll receive from Social Security, you can visit their estimator. You’ll be asked a few questions including how much you made last year.
Will you have any pension benefits coming your way? If so, you’ll need to contact the pension administrator to find out how much you’ll receive and what you’ll need to do to begin receiving benefits.
Next you’ll want to estimate how much your retirement and savings accounts can provide each year. As a general rule, financial advisors say that you can expect to take 4% of your invested assets each year without depleting them. Some planners have more sophisticated formulas, but the 4% estimate is good enough for a pre-retirement figure.
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4. Decide When You’ll Begin Taking Social Security
For most of us, Social Security will be a major part of our monthly income. You can begin collecting when you reach age 62, but you may choose to delay benefits until you reach age 70.
Why delay? Because the longer you wait the bigger your monthly checks will be. The reduction is greatest if you begin benefits before you reach your full retirement age.
Knowing when to begin collecting SS isn’t an exact science. Much of it depends on whether you need the income right away and how long you expect to live. If you’re within 4 years of retirement we recommend using this tool. It can help you maximize the amount you receive.
5. Get Out of Debt
Debt is a killer if you’re on a fixed income. Credit card minimum payments, auto loans, student loans, and mortgages all take the first dollars you have each month. You must pay them no matter how tight your budget.
Chances are that income after retirement will drop and perhaps by a significant amount. If you’re unable to repay those debts now before you retire, what chance will you have after you retire?
Do whatever it takes within the law to repay any debts before you retire. It might cause you to ask for extra hours at work or even take on a second part-time job.
6. Prepare for Lifestyle Changes
Retiring is one of those big events in your life. And just like you made plans prior to your marriage or the birth of your first baby, you need to make plans now before you retire. You’ll face decisions on where to live, whether to work part-time, how to spend your time, etc. You may have been thinking about these questions for quite awhile, but now is the time to begin to finalize your plans.