So you’re thinking about retirement – the ultimate weekend in “working for the weekend”. You put in the years of hard work, you contributed to your 401(k), you invested to build up a stronger savings – congratulations, you’re finally ready to retire (GOOD FOR YOU!!!) Nothing can feel more freeing than being able to leave the workforce and settle into a comfortable retirement. However, nothing can also feel as daunting.
If you’re ready to retire but aren’t exactly sure what you need to do before making it official, this post is for you. Read on as we share the four steps you need to take to be ready for retirement. Lets do this.
- Assess Your Spending Needs
One of the biggest mistakes retirees make is leaving the workforce before they are financially ready to do so. To avoid a financial disaster, figure out how much it will cost you to live in retirement. Add up all of your essential costs and bills (groceries, housing, utilities, medicare) as well as fun outings and expenditures – even including things like vacations.
A general rule of thumb is to budget for about 70% – 80% of your pre-retirement salary to maintain your cost of living at the current state. This number will not only give you a good idea of whether or not retirement is attainable at this time, but also a new budget to stick to once you do retire.
- Estimate Expenses
As we age, certain expenses, like commuting to work, will certainly go down. However, some expenses, like healthcare, will go up as we ease into the golden years of life.
How much you’ll have to spend on medical costs will depend on your health and overall lifestyle during retirement, but be sure to budget and plan accordingly for unexpected medical bills and expenses throughout your retirement.
3. Pay Off Debts
While you don’t have to retire debt-free, nothing can derail your retirement savings faster than having to keep up with a bunch of debt payments. Before entering into retirement, be sure all of your outstanding debts are paid off before you lose your steady salary, especially debt with high interest (like credit cards).
If paying your debt off in full before retiring isn’t an option, you can call your credit card companies and ask if they’re able to lower your interest rates, or even transfer your debt to another lender with better terms and rates, so you can keep up with payments once you do retire.
4. Determine When to Collect Social Security
While we’d all love to be financially free come retirement, the reality is that the majority of Americans will need to collect social security to fund basic essentials. However, the longer you can wait to collect it, the better, since it has a direct impact on how much you’ll get in monthly benefits. The longer retirees can wait to claim Social Security, the greater the benefits (and amounts) will be. Additionally, by waiting to claim, you also become eligible for delayed retirement credits, which, as AARP explains, provides an increase in benefits each year until you reach age 70.
Deciding to retire is a major life and financial decision that shouldn’t be taken lightly, and it’s always recommended to consult a trusted financial advisor if you’re unsure that you’re ready.
However, with the proper planning and budgeting for retirement done in advance (as well as ensuring you’ll be financially secure once you decide to retire), you can be better prepared to live out the remainder of your life comfortably.
The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, we advise you to consult with a licensed advisor.
The information contained in this post is for general information purposes only. The information is provided by FinanceOpinion.net and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.