Are you planning to retire within the next 10 to 15 years? While it might seem like the day is far away, it will be here before you know it. Before you retire, there are a number of steps that can help you prepare. It’s important to begin your financial plans now, while you still have time to make corrections. These 5 steps are a must before you retire if you want to achieve the retirement life of your dreams, stress free!
1. Outline Your Retirement Goals
What do you really want to do when you retire? Travel the world? Buy a retirement home at the beach? Move closer to your grandchildren? It’s time to figure out how to pay for those goals. Start by mapping out your primary retirement goals and estimate any major expenses associated with them. Place those expenses on a timeline spread throughout your retirement. Now you’ll have an estimate of how your cash flow needs will change according to your retirement goals.
2. Rethink Your Expenses
Reassess your budget based on your retirement goals from above. Often times, your income during retirement will be around 70% of your salary before you retired. Estimate your expected monthly expenses in retirement and include those on the timeline you made above.
Don’t forget to build in a healthy emergency fund for medical expenses. A 2017 Fidelity survey suggests that the average 65-year old couple in good health can expect to spend around $275,000 in medical costs during retirement.
3. Plan Your Retirement Income
With expenses estimated, now you’ll want to estimate of your income. Using the tools with your My Social Security account, choose your intended retirement age and track your expected income from Social Security and other sources.
Does your expected monthly income equal your expenses? If not, you’ll have to adjust either spending or income, which could require re-thinking your goals or working longer to achieve them.
4. Cut Down Debt
A major issue many face before retiring is debt. Striving to have little to no debt entering retirement is the goal. This is especially true if you have high-interest debt, such as credit card balances. If necessary, cut your spending now and divert the savings toward debt reduction before you retire.
5. Maximize Your Retirement Savings
Contribute as much as possible to your 401(k), IRA, or other retirement programs. Annual limits for 2018 are $18,500 for a 401(k) and $5,500 for an IRA. Beyond age 50, you can take advantage of “catch-up” contributions. You’ll be able to add an extra $6,000 annually to a 401(k) and $1,000 to an IRA.
You may consider shifting your investments to lower risks as you near retiring as well.
While you can’t plan for everything that will happen, you can take reasonable steps to reach a comfortable retirement. Preparation is key for a smooth transition into your new post-working life.
For more ways to save and plan for retirement, just call us at 724-929-2300 today. You can save up to $500 a year when you bundle your home and auto with CSC. Furthermore, our financial planning experts can help create a retirement plan that fits you. Call or stop into our local office and get on track for the retirement you’ve been dreaming of!