Retirement is a wonderful time of life, where you can make plans for new adventures and do things on your terms. However, not everyone is ready for retirement.
Starting retirement requires a lot of planning and thinking ahead. If you retire too early, you could spend your later years struggling financially. If you retire too late, you may not feel energetic enough to enjoy your time. So, why not take a look at this preparing for retirement checklist to get ahead of the game?
1. Check Your Assets
The best way to prepare for your future in retirement is to check where you stand financially. How much money do you have saved? Do you own any property? Thinking about what debts you owe and how long into retirement you’ll be paying them is a vital step to take.
Work out how much money you’ll have coming in when you’re retired and whether or not you’ll receive a lump sum. An easy way to do this is to create a spreadsheet of your incomings and outgoings so you can clearly see where you need to be financially before you retire.
2. Start Saving
When you’ve retired, you don’t just want money you can live off. You’ll need money to treat yourself and money for unexpected emergencies. There are many things you may need to spend money on during your retirement that can’t be planned for.
For example, unexpected medical costs, vehicle replacement, or home damage. There can also be a waiting period between when you retire and when you start receiving your pension.
A savings pot should include around six months’ worth of expenses. Work out your outgoings for a month and multiply them by six. This financial cushion will ensure you don’t have to worry about anything stopping you from being financially secure.
It’s often a good idea to start saving before you retire but if you have already retired and you don’t yet have a savings pot, it’s time to start one. Be sure to use a separate banking account for your savings so you aren’t tempted to dip into it at any point.
3. Say Goodbye to Your Debt
No one wants to be paying debt into their retirement. It’s a financial weight that doesn’t bear thinking about but for many, it’s a sad reality. It’s a good idea to focus on getting your debt as low as possible before you retire.
Most people’s income decreases after retirement but debt amounts stay the same. This means you’ll be paying out a higher percentage of what you have coming in. If you’re able to, try paying a bit more off each debt every month.
Alternatively, choose the debts you’d like to get rid of before retirement and work solely on putting as much money towards them as you can reasonably manage.
4. Make the Right Choices
Many people start planning what they want to do in their retirement years before they reach retirement age. Anything from holidays abroad to remodeling their existing home or purchasing a new home.
Before you make any hasty decisions, it’s good to get some financial advice. For example, if you’re looking into buying an additional property or selling yours, finding the best real estate agent for retirees is a must.
The more you know about buying and selling property in retirement, the better equipped you to prepare yourself financially.
5. Health Insurance
You may be used to your employer handling your health insurance. However, for many people who retire earlier than planned, retirement means having to pay their healthcare costs. You may have to pay up to 15% of your retirement pension towards these costs.
Not surprisingly, it can be easy to forget to factor in these costs in your planning. Healthcare costs and taxes are among the two highest financial outgoings that people forget to plan for.
If you retire at or after the age of 65, health plans like Medicare should cover your health care needs in retirement. However, it’s always best to read the small print before making assumptions.
If anything isn’t covered by your healthcare insurer, you’ll need to make arrangements for that cover or start putting money away specifically for healthcare costs.
6. Investing and Withdrawing
Investment is a great way to get a return on your money. There are several ways you can invest your money and retirement investment risks vary. Depending on what you want to get out of your investment, it could be a great way to ensure you have a steady flow of money in your retirement.
Anything from government bonds, dividend income funds, or real estate could see a potentially large return. A total return portfolio would also allow you to withdraw while working toward a long-term goal.
Withdrawing from your retirement accounts can be done once you reach the age of 60 without incurring any early withdrawal fees. You can then transition it to an IRA account.
Preparing for Retirement Checklist: Getting Retirement Right
Once you’ve read through the preparing for retirement checklist and financially secured your future, the rest is just dealing with your emotions. Retirement is a big change for anyone and you may have to say goodbye to coworkers you’ve become close to. Remember, there is an adjustment period when you retire so don’t try and do too much too soon. Take your time and enjoy your freedom- you’ve earned it. Why not take a browse through some more of our advice articles while you’re here?