An article recently posted on Kiplinger, “A Pre-Retirement Checklist: 8 Steps to Take Right Now”, lends some great advice about preparing for retirement now. Waiting another day will only make the preparation harder!
1. Determine Where You Will Live. As you consider the kind of lifestyle you wish to lead, you also need to find a location that will support it. If you plan to travel a lot, maybe you should downsize your home, consider a condo. Maybe you would prefer peace and quiet in your retirement and want to get away from the hustle and bustle, a small town could be what you are looking for or maybe a place near your favorite vacation hideaway. The other piece to this to consider is taxes and cost of living. If you are more concerned with saving money, then research states and locations with lower taxes and cost of living.
2. Practice. Once you retire it can come as a shock being disconnected from your typical social network and no longer having the typical 9-5 job schedule. This can be a hard adjustment period, but one way to make the transition easier is to start figuring out now what kind of activities and groups you will want to participate in. Practicing this part of your retirement now will help you determine if what you think you want to be part of is what you will really enjoy doing. Maybe there is volunteer committees you want to work with, a class you want to teach, or a hobby you want to pick up and become an expert in. Knowing you actually enjoy these activities now will make it more exciting later when you have a lot more time to dedicate to them.
3. Retire Debt. Make a list of your debts and rank them from highest to lowest interest. Then start working on paying them down so when you retire the only expenses you have to worry about will be variable costs you generally will be able to control.
4. Reexamine Your Risk Profile. You may want to consider a more defensive investment strategy once you are five years out from retiring. Potentially it is a good idea to rebalance your portfolio quarterly to make sure you are on top of any unfavorable exposures. Talk with your financial planner about potential future strategies for retirement.
5. Healthcare. As you age, healthcare becomes a more prevalent part of your life. It can get quite expensive too if you have not properly planned for it. Medicare will not necessarily pay for all of your expenses. It is a good idea to work with an estate planning attorney to figure out saving for long-term care, you might consider long-term care insurance for instance or buying a private insurance policy. Along with this you will also want to establish a health care proxy and a living will, again an estate planning attorney will be able to guide you through this.
6. Budget. You’ve probably heard it a million times that you need to start budgeting, and it is true. If you know the lifestyle you want to lead then you need to also know how to fund it. This can come from putting yourself on a trial run of a the budget and taking note of what works and what doesn’t. Additionally, you should come up with two numbers. The first should factor in the amount you need to cover necessities like housing, food, and healthcare. The second is the cost of things you want, like travel, a specific care, or memberships. Map out a plan that will help you ensure you have the funds for these two numbers.
7. Be Ready to Apply for Social Security Ahead of Time. You will want to apply for Social Security at least three months before you want it to kick in. Before applying make sure you have the proper documentation. Your estate planning attorney can help you with this and you can check out a list here.
8. Roll Over your 401(k). You may want to consider transferring the money from your 401(k) into an IRA to increase investment options. This can allow for more flexible estate planning and offer increased distribution options.
Retirement can sneak up on you, so it is best to starting thinking about what you can do ahead of time to ensure there is no last minute panic when it gets close. This checklist is a great way to jumpstart your planning and help you have peace of mind that when it comes time to retire you will be ready mentally and financially as well as have relationships with professionals who can guide you through.
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Reference: Kiplinger (October 9, 2018) “A Pre-Retirement Checklist: 8 Steps to Take Right Now”