Are you retiring soon?
If you’re within ten years of retirement, it’s time to take a hard look at where you stand. A research report conducted by the National Institute on Retirement Security found that a startling 45 percent (38 million) of working-age people age 25-64 have no retirement assets. This includes 401k plans and IRAs. Two-thirds of households aged 55-64 have retirement savings accounts valued at less than one year’s worth of their annual income. These figures put soon-to-be retirees in dire straits.
Fortunately, there are steps you can take now to improve your post-retirement fiscal condition, even if you’re only ten years away (or less) from retirement. Here are a few tips to help you get started.
What Will You Do With Your Time?
According to AARP, the first step in planning your retirement is to define it. If you haven’t done that in detail yet, now is the time. You may want to travel, but to where? The local beach for the weekend? Or perhaps Australia for the winter? Be as specific as possible so you can gauge where you need to be financially in order to pull it off. You may also discover that expensive vacations aren’t as appealing to you as financial security is, so that weekend beach trip may be just right after all.
Crunch the Numbers
Once you know exactly what you want out of retirement, it’s time to determine whether or not you have the means to make it a reality. This is where you may want to call in a professional. Even if you have no problem balancing your checkbook or managing your investments, seeking guidance from a financial advisor can be an asset. He will be able give you a clear picture of where you stand now and what you need to do financially to prepare for retirement. He’ll also have advice on best investment practices, what you can do to maximize your investments and minimize your tax liability, and he can even help you draw up a retirement budget.
Depending on your current age and health, you may already be receiving Social Security benefits or Social Security disability payments. If that’s the case, no matter how small you might think the monthly payment is, make sure to include the figure in the information you provide the financial advisor.
If you aren’t yet receiving Social Security benefits, consider holding off as long as you can because the longer you wait the more you’ll receive in benefits. For every year after full retirement age (up to age 70) that you postpone applying for benefits, you will receive an additional 8% annually.
Plan for the Worst
As you look at the financial side of retirement, don’t forget to consider that ‘life happens’. Make sure that part of your planning includes reviewing your car and homeowner’s insurance policies to determine what exactly it is that they cover. Make an appointment with your agent, and go over your policy, adjusting if necessary. The goal is to let each policy pick up as much of the tab as possible should anything unexpected happen, such as storm damage or getting into an accident with an uninsured driver. Once you’re retired it will be more difficult to pay out of pocket for some emergencies.
Planning for retirement isn’t nearly as fun as retirement itself. But, it’s a necessary evil. The better handle you have on where you stand financially and where you need to be when it comes time to retire, the more enjoyment you’ll get out of it in the long run.