You’ve put in your time on the job, and hopefully you’ve tucked away savings. You’re now within a decade of retirement. That alone is cause for congratulations. However, there are moves you should make to prepare for a nice landing. The key is to make them now, while you have a chance to make any changes. With that in mind, here are steps you should take to prepare for your upcoming retirement.
What Kind of Retirement Do You Want?
Let’s start there. Before you do any prep work, you must seriously consider how you want your retirement to look. For instance, is travel in your future? Part-time work? Volunteering? Then you must go over your financial situation and see if what you find matches your goals. If it doesn’t, then you need to either tweak your vision or figure out how to pad your resources, perhaps through cutting back on spending.
Balance Your Portfolio
This is the time to make sure your investment portfolio is diversified, which will help protect you against stock market volatility and economic downturns. That’s not to say that you should stay away from stocks — to the contrary. The potential growth that stocks offer remains important during this life stage. Just mix up your investments with mutual funds, bonds, and even alternative investments such as art or real estate.
Optimize Your Retirement Accounts
Boost your contributions into your retirement accounts. Put the maximum amounts permitted into IRAs, your 401(k) or other retirement plans, especially if your employer offers maximum matching contributions. This is also a good time to go over any retirement accounts you might still have with previous employers. While you’re at it, find out about choices you must make regarding 401(k) distributions when changing jobs. You may want to discuss your options with a tax professional.
Reduce Your Debt Load
This is the time to do your best to get out from under your obligations. Pay down your credit cards and avoid racking up more significant debt. If you’re in trouble in that area, get help at www.freedomdebtrelief.com. Paying cash for big purchases is now wiser than ever. You also may want to accelerate your mortgage payments so that you have a home “free and clear” upon retirement.
Figure Out Your Retirement Income
It’s time to look at what you’re likely to receive from Social Security, any pensions, etc. Any other retirement monies must derive from savings, investment accounts, and anything you earn during retirement. To ensure that you have sufficient assets throughout your retirement, experts have long ascribed to the maxim that you can afford to spend 4% of your funds annually in retirement. For instance, if your assets total $1 million, you should be able to comfortably spend $40,000 during each retirement year.
Think About Likely Expenses
When preparing for retirement, estimate what your retirement expenses will look like. What you spend will hinge on how you live while retired. Of course, expenses such as health care may increase as you age, while those including clothing and commuting may decrease. If you expect to do a lot of traveling, though, those overall costs may exceed what you’re shelling out now, pre-retirement.
Think About Future Medical Costs
Medicare will take care of most of your regular health care costs – if you’re at least 65 upon retirement. But think about adding supplemental coverage to help cover other healthcare expenses, which will probably increase as you age. You also may want to consider purchasing long-term insurance to help protect your assets. Your premiums will be lower if you buy now. Also, now is the time to make maximum contributions to any health savings account.
Decide Where You Will Retire
Where you live during retirement will have a significant affect on your expenses. Moving to a low-tax state, for instance, can help, as can remaining in your state but relocating to a smaller abode that’s more financially doable. I find that an assisted living community near me may be the place to retire to.
In reviewing these steps to take to prepare for your upcoming retirement, don’t make the mistake of thinking that you have plenty of time and that you can tackle everything later. While it’s never too late to start, preparation takes ample forethought and action. You’ll have a better retirement if you start planning now.