Retirement has always been off on the hazy horizon, but suddenly, it's coming into sharper focus. Sure, you've always saved for your retirement, but it never seemed quite real. Now, it's not that far away, and for the first time, you are really beginning to envision what your post-retirement life will look like. That image might include things like more time spent with family, on the golf course, volunteering, traveling, or pursuing hobbies. In order to enjoy all of those things, there are a number of items you should first check off on your retirement checklist. Here are ten things to do before retirement.
Just because you're riding off into the sunset doesn't mean you won't have to think about the cost of horseshoes and hay for the horse. In order to figure out whether the amount of money you've saved will be sufficient, you need to estimate how much money you'll need. That will depend on things like how much you intend to travel, whether your mortgage is paid off, and so forth. Create a comprehensive budget for retirement including everything from monthly living expenses to the cost of pursuing hobbies.
Knowing what you'll need to live on is one part of the equation. Identifying where that cash flow is going to come from is another. Evaluate your various sources of income, including Social Security, pensions, annuities, and other investments. If your income stream is insufficient to support your budgeted expenses, you may either have to adjust your planned expenditures downward (if possible), plan to retire later, or figure out how to increase your income in retirement.
If you're retiring, you have likely had an employer picking up much of the tab for your health insurance. Once you're retired, at least some of that burden will fall on your shoulders. Yes, there is Medicare if you are of an age to qualify, but you may also need prescription drug coverage and "Medigap" coverage, as supplemental insurance is commonly known. The unfortunate reality is that you will probably need more medical care in your golden years than you did previously. If you don't make sure you have the appropriate coverage, the expense can be devastating.
If you don't already have long-term care insurance, now is the time to get it. The longer you live, the more likely it is that you will need care in a nursing home or other long-term care facility for at least some period of time. Long-term care insurance can help offset the significant costs of nursing home care. If you wait too long to look into long-term care insurance, you may not qualify.
While you're at it, consider your existing insurance policies and whether the needs they originally met still exist. For instance, you may not need as much life insurance as you did when your now-grown children were small.
If you're a homeowner and you've been in the same place for a while, your mortgage might be paid off. If so, that's great! If not, think about what it's going to take for you to make mortgage payments after retirement. If you are planning to refinance, it may be better to do so now rather than later. After retirement, you may find that lenders are unwilling to allow you to borrow, or if you can get a loan, you won't qualify for as favorable rates as you could get while working.
While working, you may not have thought too much about your cash reserves. After all, that next paycheck would be rolling in any day, boosting your bank account. But in retirement, you will want to be prepared for financial emergencies, and that means having savings equal to at least six months' worth of expenses in the bank.
The investment strategy that served you well early in your days of retirement planning may not be what you need now that retirement is getting closer. Early on, your strategy probably involved asset accumulation and greater risk-taking to grow that nest egg. Tying up assets in longer-term investments was fine then. Now, however, you need to turn your eyes to making sure your investments are liquid, flexible, and produce adequate income. You should be taking fewer risks, since you won't have as long for your portfolio to rebound if you make a bad investment decision. As costs of living increase, you want to make sure your investments keep up.
As with insurance and your investments, when it comes to your estate plan, what you needed 30 years ago may be very different from what you need now. Before you retire, sit down with your estate planning attorney to discuss your goals and needs. You should be thinking about preserving assets for your family and keeping them safe from the nursing home, along with powers of attorney and medical directives in the event you become unable to make decisions for your own finances or health care.
Now is the time to think seriously about how you will spend your time in retirement. It's good to have a foundation laid before you accept your gold watch and pack up your desk. If you're interested in volunteering, make connections with organizations that interest you before you retire. If you're thinking about travel, plan a trip for sometime in the first six months of retirement so you'll have something to look forward to. You don't have to schedule the early months of your retirement down to the minute, but the more specific your plans are, the better you'll feel about the transition.
You feel like you should be eagerly sprinting toward retirement, but take a moment to assess how you really feel, not how you think you should feel. If you truly can't wait for retirement, terrific! Enjoy your newfound freedom. If, however, you're apprehensive or unenthusiastic, pay attention to that. Maybe it means you shouldn't yet retire (if that choice is yours). Perhaps it means you need to transition into retirement by working part time. If your lack of enthusiasm is due to concern about finances, have a frank talk with your financial planner before you leave work for the last time. Retirement is literally what you have worked all your life for; you deserve to enjoy it.
If you have questions about whether you're ready for retirement, we invite you to contact our law office to schedule a consultation.