What’s your vision of a perfect retirement? Relaxing in the sun, traveling the world, working when you want as much as you want? The best plan for retirement starts long before you’re ready to leave your job. The sooner you begin, the more time you have to think about what you want and plan for how you’ll get there. As you age, planning becomes even more crucial. Here are some of the steps you should take as you approach retirement to help you achieve the life you want. 

1. Assess Your Current Financial State

You should have a clear understanding of your income, expenses, assets, and debt. If you haven’t already done so, get your finances in order. Track your monthly income and expenses so you know where your money is going. Review all bank, credit card, investment, and retirement account statements monthly. If you have debt, develop a plan to reduce or eliminate it. You should then create a budget that aligns with your retirement plans so you stay on track. That may mean increasing savings, reducing expenses, making step-up contributions to retirement accounts, putting extra money into a Health Savings Account (HSA), and other tactics.

2. Decide Where You Will Live

There are many factors to consider in deciding whether to stay where you are or move. Cost, family, friends, social/religious activities, weather, healthcare, transportation, and accessibility of your home if you become disabled are just a few. Importantly, you should think about not just where you want to live now, but what would happen if your health deteriorated.

3. Consider Your Retirement Lifestyle

Your retirement may last several decades. How will you fill your time? Some people decide to work part-time during retirement for financial reasons, or because they enjoy it or they are bored at home. You may be able to do a phased retirement where you gradually reduce your time working. Maybe you want to volunteer, take classes, travel, or pursue a hobby or other interests. This is the time to explore new opportunities. Studies show that those who find some purpose in retirement are happier.

4. Plan for Long-Term Care

Unfortunately, many of us will need some long-term care during our lifetime or one of our loved ones will need it. Either way, the financial impact can be devasting because Medicare doesn’t cover most long-term care costs. It is important to talk with your family, a lawyer, and a financial advisor about your wishes regarding your care, including how you will pay for such expenses. You also will need appropriate legal documents like a healthcare proxy, power of attorney, will, and possibly a trust. If you are likely to be a caregiver to a loved one (spouse, parent), discuss their plans and how caregiving may affect your finances and lifestyle.

5. Determine When and How You Can Afford to Retire

Once you understand your finances and the life you want, you must calculate how much money you’ll have when you retire, including money in savings and retirement accounts and income from all sources (ex. social security, pension, investments, etc.). Next estimate your expenses, both necessary and discretionary.

Necessary expenses are housing, food, clothing, healthcare, insurance, utilities, transportation, and the like. Discretionary expenses are dining out, travel, entertainment, gym memberships, subscriptions, and similar expenses. Inflation should also be factored in. Free online calculators can assist with this. However, it’s best to consult a financial advisor to help you determine how long your savings will last and what changes you should make if you are likely to outlast your money. This can include delaying retirement, working part-time, and taking advantage of social security, tax, investment, and other strategies that can help maximize your returns.

6. Consult Financial and Legal Professionals

A daily money manager can help you develop and manage a budget before and after you retire. You can also get assistance with bill paying, tracking expenses, monitoring accounts, recordkeeping, handling insurance claims, and other day-to-day financial tasks.

A financial planner can create a customized plan for retirement, invest your money, and advise on various strategies to maximize your funds and reduce taxes.

A tax professional (accountant or attorney) can provide more detailed advice on minimizing taxes. An estate planning attorney can also develop a comprehensive estate plan including preparing documents like those mentioned above.

Retirement planning can be complicated because you’re trying to project into the future. While no plan is foolproof, the more effort you put into planning, the better for you and your family. If you need help managing your daily finances, contact me for a free consultation.