Do you repeatedly ask yourself the same question: How much do I need to retire?
It is normal to feel flustered as you approach retirement age. After all, concluding your career is a big step you cannot take back. So, how do you know if you are set for a secure, comfortable retirement? Here are six things to do before you retire.
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Set Your Retirement Budget
Generally, your need about 70% of your current income to live comfortably after retirement. Most earn that income through retirement savings and social security benefits; others later build up their retirement funds with part-time work and additional assets.
Setting a retirement budget allows you to enjoy your retirement life without overspending and exhausting your retirement funds too soon. It also helps you identify areas where you can save for a more sustainable future.
Know Your Social Security Benefits
Your social security benefits are determined by your highest-earning 35 years but can only be withdrawn after 62 years old. However, Social Security benefits also increase by a certain percentage each month you delay your first withdrawal until age 70.
Plan Your Vacations
If you’ve been dreaming about those road trip adventures, it’s time to turn them into reality. However, you should plan your vacations before you retire so you know how much you’ll need to save up.
Another reason to plan your retirement travels early is so you can still utilize any corporate discounts you may get on hotels, vehicle rentals, and flights.
Switch to Medicare
You can switch your health insurance to Medicare at age 65. However, Medicare may not cover everything, such as prescription costs, copays, hospital costs, and nursing home care. Understanding your Medicare coverage can help you spend your retirement funds wiser. For example, you may need to put funds aside for long-term care.
Additionally, Medicare has several coverage options. Therefore, evaluating your overall health is critical to determine your most suitable plan.
Look For Part-Time Jobs
While we all prefer to simply retire and relax, sometimes you might need additional income. Finding part-time jobs or contracting gigs before you retire can prepare you for the unexpected.
Many also get into independent consulting after retirement and continue to develop their legacy in the industry they’ve worked in before retirement by sharing their lifelong knowledge with younger professionals.
Have an Emergency Fund
Separate your retirement savings and your emergency funds. Make sure to save enough to cover at least six months of income in case you need to cover unexpected medical, insurance, and housing expenses or if you encounter a delay in your pension.
If you plan on retiring early, your emergency fund should sustain you until you reach the age to withdraw your 401(k), IRA without penalty.
Housing Options
The area you live in during your working years may not be where you want to retire. You probably chose your neighborhood because of its convenience to your employer or vicinity to your children’s schools. Many retirement havens nationwide are known for their tight community and laid-back living pace, whereas others attract more ambitious retirees looking for continued development and education opportunities.
Other housing questions to ask before you retire can be:
- Would I need assisted living?
- Do I prefer to live closer to my family?
- Can I downsize? Or would I prefer a larger space?
If you need to take out a loan or mortgage for retirement housing, the process will be easier if you have an active income, in other words, while you are still in the workforce!
Retire Together
Speak with your partner about your retirement plans. Many retire around the same time so they can spend the rest of their lives exploring together.
Others may prefer to retire one or two years apart for more financial stability. Either way, having a conversation with your partner is recommended to strategize your retirement plans together. This allows you to make the best use of your savings and resources.