If retirement is in your near future, you’ve probably mapped out how you’re going to spend your newfound freedom, where you’re going to go, and how much you’re going to love sleeping in or staying up late. Whether retirement is years in the future or simply months within reach, you must carve out time to complete a few important financial chores to help ensure your retirement is as successful as it can be.
Imagine what you want retirement to be
If your retirement plans have been hazy on the details, it’s time to bring those dreams into sharper focus. The time to figure out what your life in retirement will look like is well before you’re done working. This means establishing an initial spending plan and figuring out how it adds up to your current savings, according to Scott Spann, writer for TheBalance.com.
Create a retirement budget
Whatever date you set for your retirement, your last-minute planning should begin at least one year before, while you’re still earning a steady paycheck. And a crucial component of that preparation includes a realistic budget.
“Put together a detailed monthly budget estimating your expenses during your first year of retirement. Then do the math to make sure you can afford to withdraw from your retirement accounts the amount you’ll need to fund your spending after accounting for any other sources of retirement income you might have, such as Social Security or a pension,” advises Amy Fontinelle, writer for Investopedia.com.
This exercise is essential because it lets you know if your estimated budget will meet your needs, she explains. And if it doesn’t, it gives you some time if you need to rethink your plan.
Satisfy outstanding bills and debts
One crucial way to help ensure less financial stress after retirement is satisfying your debts before you retire. Since your retirement will be built on a fixed budget, you may not have a lot of wiggle room to deal with outstanding bills like a balance on a high-interest credit card, warns Spann.
On the other hand, carrying a mortgage through retirement can be a sound decision.
“It’s true that the retirement transition is usually easier to make financially if you are mortgage-free. But by paying off your mortgage early, you might neglect your retirement savings and so miss out on important tax-deferred gains,” Spann notes.
Research health care options
Once you stop working for your employer, you no longer have access to employer-sponsored healthcare benefits. And healthcare is expensive! You’ll need to determine how you will pay for health insurance and your healthcare needs during retirement. Most likely, you’ll want to familiarize yourself with Medicare, which is attainable for adults aged 65 and older, advises Fontinelle. Although Medicare is an incredible resource, it can be hard to understand. Fontinelle recommends researching Medicare offerings, its processes, and what you’ll have to pay to ensure you have the coverage you need at a price that fits your budget. You’ll also want to determine what Medicare won’t cover as well as figure out if your current doctors accept the insurance, she adds.
Before you’re done working, make sure you have a clear picture of what your retirement will be. It’s important to get your current finances in order, establish a realistic expectation of future financial responsibilities and goals, and protect your health when your employer benefits cease.