For most people, retirement is a natural phase of life. Whether you have a set age you need to reach before you retire at or a certain number of years on the job, it is one of the most celebrated milestones of our later years. While the idea of retirement is well known, not many people realize how much planning should go into your final decision of when you will retire. Before you set it in stone, here are some great tips on things to do before you retire.Pay, Pay, Pay
Let’s face it, we work to pay bills. And, as we get older that doesn’t change. So, before you retire, it is important to pay as many financial liabilities as you can. You might be wondering why the first bit of advice is to spend your money when you had thought the years before retirement were all about saving it. While it is true that saving money is one aspect of preparing for retirement, eliminating hefty financial expenses, while you still have a steady working income, is just another way to save in the long run.
Let’s take your mortgage, for example. The rule of thumb when it comes to signing on for a mortgage is that it will cost the equivalent of 30-40% of your income. That’s why, if possible, paying off your mortgage before you retire can eliminate a huge financial burden when your income is reduced. In addition to paying off that bill, assess your property to make a list of any major and minor home repairs that might need to be performed. While you may have more time to reduce some of the costs of labor after you are retired, repairs that become costly are easier to be completed while your income is higher.
I’m sure you have seen friends or family members who retire and then buy a brand-new car. It is one of the alluring incentives of living a carefree life with your newfound freedom. But, most decisions to buy a car after retirement aren’t thought through very carefully. With a new car comes higher insurance rates, taxes, and fees that you might not be prepared for. If you think you might need a new car soon, or you simply want a new car, mark that on your to-do list before you sign your retirement papers.Prep Work
Another priority on your list of things to do before you retire should be a thorough sit down with your financial planner. Talk to them about things like:
- Paying off your debt
- Setting a new budget
- Assessing your life insurance needs
- Signing up for long term care insurance (which should be done by your 50s, at the latest)
- Estate planning
Retirement is not only going to leave you with a lot more free-time, it is likely going to change the way you live financially. If you are prepared, that transition won’t seem to make much of a difference. If you are not prepared, it will hit you like a freight train and could even leave you in a difficult position. Although you might have to live off a reduced income, there are ways to reduce your expenses before you retire. This will help alleviate the burden that this financial change can bring with it. Life is changing in many ways, but talking to your financial planner to prepare for these changes will leave you living a happy retirement.Optimize Your Income
Although you might be reducing your working income, there are ways to optimize the income you will have when you retire. Social security will be part of your regular monthly income, at some point. With social security, the longer you wait to take it, the higher the monthly check will be. If you can, hold off on taking your social security income to have a higher check each month.
It is no secret that the stock market can be a potential risk. And, as we get older, we want to eliminate any financial risk we may have. Dial back on the amount of money you invest in stocks. And, you might want to also consider moving some of your stock earnings to a savings or money market account.
Healthcare is a part of retirement that you should carefully consider. It is important to understand Medicare. When you turn sixty-five, Medicare Part A, which covers hospital expenses, does not cost anything to the person who is covered. So, taking advantage of this can be helpful. Medicare Part B, however, requires a monthly premium be paid. This part of Medicare covers medical expenses. And, as you get older, the monthly premium price rises. Talk to your financial advisor about the pros and cons of staying with your current plan versus enrolling in Medicare.
Another thing to consider, regarding healthcare, before you retire, is getting the most of your coverage before you lose it. You might want to make the most of your healthcare plan through your employer, and minimize the expenses of your healthcare, after you lose that coverage, before you retire. Here are great ways to reduce expenses in retirement while getting the most of your current healthcare coverage:
- Get an annual screening and physical
- Refill your prescriptions before you have your final day at work
- Go for a dental exam and have any necessary work done
- Get a hearing test
- Assess whether you might need hearing aids
- Have a vision test
- Get new glasses, if needed
Retirement will be a major life change. In addition to preparing financially, you should prepare your mind and body to retire. If you aren’t excited to retire, don’t! Many people retire only to find themselves back out in the work force. Retirement is meant to give you free time to enjoy the later years of your life. Although you will want to relax, spend time keeping your mind active by engaging in activities that still allow you to use your brain. And, find ways to workout. The last thing you want during retirement is to see a decline in your health because your body is inactive.
Most importantly, especially after you have made all these important steps for financial security, sit back and enjoy. Remember, you can’t take it all to the grave! Find ways to become an active part of your community. Give yourself a reason to live many years after you retire. And, make memories with your family and friends. You put most of your life into working, now it’s time to live!