To make appropriate choices, you need to predict—as well as you can—your future economic circumstances. You’ll also need to establish your post-retirement goals. When you’ve determined how much of an income stream you’ll probably require in the future, you’ll be in a position to make wise choices now about income, savings, investments and other employer-sponsored retirement plans.
A financial advisor can help you develop an overall strategy for approaching your financial goals that not only anticipates what you’ll need to do to pursue them, but that remains flexible enough to accommodate your evolving financial needs.
Five years before they retire, older workers should start focusing seriously on the big changes ahead, says Emily Guy Birkin, in her book, The 5 Years Before You Retire: Retirement Planning When You Need It the Most.
Estimate—Consider your health and family history to estimate your lifespan and to determine how long your retirement funds need to last.
Calculate—Add up your monthly retirement income (without windfalls or inheritances) from:
Build up—Collect every penny of an employer’s 401(k) match; in addition, consider increasing your retirement savings by at least one percent.
Anticipate—Use online retirement calculators to see if your savings and income will last for your projected lifespan; take inflation into account.
Insure—Consider disability insurance if the inability to work could upend your plans.
Budget—Itemize an entire year’s spending to create your retirement budget. Include out-of-pocket medical costs, long-term care, taxes and inflation.
Pay down—Retire all debt possible, including mortgages, vehicles, credit card balances and other loans.
Plan—Think about downsizing. If you’re going to stay put for now, research fallback options for the future.
Insure—Price long-term care insurance and weigh pros and cons. If someone depends on your income, consider purchasing life insurance.
Consult—Talk to your financial advisor for help on running your numbers on sophisticated planning software, spot planning gaps and refine your investment strategy.
Catch up—Complete postponed home-maintenance tasks. If possible, get ahead of anticipated repairs and replacements.
Decide—Contact the Social Security Administration to learn about taking benefits earlier rather than later, and choose when you’ll claim your benefits.
Study—Learn all you can about converting savings to an income stream; and plan how you’ll withdraw your funds, including how to meet required minimum distributions. Supplement—If money will be tight, find a second source of income. For example, take in a boarder or start a business on the side.
Assess—Decide the bare minimum you need for a comfortable retirement. Can you fill any income gaps or should you adopt a longer horizon?
Test—Live on your retirement budget to see where it needs adjusting.
Plan—Write a will and consider establishing a trust. File healthcare directives and appoint a legal power of attorney.
Disconnect—Tell adult children, lovingly, that they’re on their own financially.
Regroup—If you can’t afford to retire, then don’t, says Birken. Run your worst-case scenario with a financial planner and work longer, if possible. Delay collecting Social Security and cut spending to the bone.
Replace—If you can afford to, consider buying new Sign up—Research Medicare and supplemental medical plans and enroll in Medicare three months before your 65th birthday.
Consult—Seek professional help before withdrawing income from your retirement portfolio.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
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