Retirement is something that many of us can’t wait to experience. The idea of doing your own thing, getting up and going to bed whenever you want, and just relaxing is so appealing. But wait a minute. There are some things you need to do before you retire. Let’s take a closer look.
Pay Off Debt
First things first. You do not want to enter your retirement years carrying debt. You want to pay off everything, especially your house. Think about it. If you don’t have a mortgage payment that’s more money to invest in doing what you want. Put your debt payoff strategies into overdrive to pay off everything.
Determine How You’ll Spend Your Time
What do you want to do when you retire? Do you want to travel the world? Do you want to stay home doing hobbies? Do you want to do both? What you plan to do during your retirement years is important. Obviously, some lifestyles are more expensive than others.
Calculate How Much Money You’ll Need
This is where many people have problems. You might take the cost of groceries, utilities, entertainment, and transportation into account but what about healthcare? Our healthcare needs rise drastically the older we get. Medications alone can be outrageous. Talk to a financial expert to help determine what to expect.
Have a Healthy Emergency Fund
You want to continue to have at least 6 months worth of expenses in your emergency fund should something drastic occur. This should be separate from a health savings account or home repairs account. This is for the unexpected.
Consider Income Sources
Where will you receive money from when you retire? Social Security should have sent you papers on what to expect when you retire. If you have a pension at work you should also consider that income. You want to avoid using the funds in your 401k or IRA until you truly need the money (or live off the income from your retirement investments only if you need additional income - without touching the principle amount).
Change Your Investing Strategies
The closer you get to retirement, the more conservative you want to be with investments. Five years before retirement is not the time for high-risk investments.
Review Your Estate Plan
Last, but not least, review your estate plan to ensure that everything is the way you want it. If you haven’t started an estate plan this needs to be on the top of your list. What happens to your estate depends on these documents.
Retirement is something we all work toward. However, before you jump the gun and retire, you need to take the time to have your finances in order and be prepared for what retirement means for you.