What You Need to Do Before Retiring

As the kids move out of the house and you start to look to the future, you may be considering retirement. Hanging up your hat and leaving the workforce can give you opportunities to explore new hobbies, travel the world, and do all of the things you didn’t have time for before. Today’s retirees look nothing like the “old folks” of yore. They are active, excited, and ready to begin the next chapter of their lives.

Before you can retire, there are a few things you need to do. This guide will help you get your finances in order so you can live comfortably through the next few decades.

Be Realistic About Your Retirement Timeline

Image via Pixabay by dietcheese

You may think you have enough saved for retirement, but you may want to check your math and make sure your funds will cover most of your costs for the next two decades (or more). According to the U.S. Census Bureau, the average length of retirement is 18 years. The average age of retirement is 63. That being said, most people will live well beyond the age of 81. The average 62-year-old man has a 40% chance of living to 85 and a 19% chance of living to 90. The average 62-year-old woman has a 52% chance of living to 85 and a 31% chance of living to 90.

If you are planning to retire in your 60s, your funds will need to support you for the next two to three decades. As a general rule of thumb, it is better to be over-prepared and assume that you will live longer than you think. This will prevent you from burning through your retirement funds too early.

Try to Pay Off Any Debt

Your retirement is meant to be spent living off of the savings you worked so hard for. It is intended to be a time to relax and enjoy the world around you. The last thing you want is to spend your post-work years worrying about debts, piled up bills, and occurring interest. This is why many people try to pay off their debts before they retire, whether it means working a few years longer or cutting other costs to make larger payments.

“Some of those things won’t be easy or convenient, and you’ll be tempted to put them off,” the team at After 50 Finances writes. “If you do, those debts will be a heavy burden once you no longer have that regular paycheck.”

Consider the debts you currently owe. These could include major payments like a home mortgage or small credit card debts that you can’t keep up with. Medical bills, student loans, car payments, and other expenses also count and can reduce your monthly spending money when you need to keep making payments.

Any debt you can consolidate or pay off can give you peace of mind as you head into retirement.

Determine When You Want to Take Social Security Payments

As you map out your finances and plans for retirement, decide when you want to start accepting social security payments. The earliest you can start to accept social security payments is at 62. However, if you can wait until you are 70, then you could receive larger payouts.

“Waiting until full retirement age (66 years old for many, 67 for those born in 1960 or later) results in a benefit some 30% higher than taking benefits at age 62,” the team at Investopedia writes. “Waiting until age 70 results in a benefit about another 32% higher.”

Taking out social security early could also limit the amount of benefits your receive, especially if you are still working when you start to receive payments. While you shouldn’t live uncomfortably for several years in order to increase your payments, it may be in your best interest to delay social security payouts until you reach 70.

Consider Any Upcoming Lifestyle Changes

It’s understandable that you may want to take a few months (or years) off after you retire to appreciate your life and family. However, looking to the future can help you plan for major upcoming expenses or financial opportunities that could come your way.

Take time to reflect on what you want to do now that you are retired. You don’t need an answer right away. In fact, this is something you will want to think through carefully. A few options to consider include:

  • Downsizing to a smaller home now that the kids have moved out, or moving to a one-story home with fewer stairs.
  • Moving to a state or city you always wanted to live in.
  • Planning for travel or other hobbies that you want to pursue and their expenses.
  • Working after retirement. You may want to get a part-time job as a hobby or teach to help the next generation fill your shoes.
  • Long-term care planning and funeral costs. While these may be a few decades away, planning for them now may help your family when the time comes.

These are major life decisions that each have their own expenses and profits. For example, downsizing a home may help you save money unless you move to a more expensive area.

Make Sure You and Your Spouse Are On The Same Page

Communication is important at any stage of a relationship, but you will need to prioritize it as you approach retirement age. In the years leading up to retirement, talk about when you want to retire and why. Discuss your plans post-retirement and see if your significant other is on board. They might have other plans or financial concerns that you need to address before both of you are ready.

Retirement discussions are particularly important if you both work as you may be asking your spouse to be the sole breadwinner for a few years until they retire as well.

You shouldn’t have to be a financial expert to retire comfortably. With these small steps, you can create a plan that guides you to a healthy and happy retirement. If you have any questions or concerns, we are here to help. Contact 3D Wealth Advisors today and get a second opinion on the state of your retirement plan.