Retirement takes years of planning and saving. You have been spending plenty of time of thinking of how you will spend your retirement years. Even though you have spent all this time planning, there are still a few critical things you need to decide on and tie up before choosing when you are ready to retire. There is an extreme amount of mental and financial preparation before hitting your glory years. Keep reading for a few of the things you will have to decide before you can retire.
Have you saved up enough?
Since you will be living on a fixed income based on your 401(k)s, IRAs, and pensions, you need to make sure you will have enough money to sustain a life for yourself when in retirement. Instead of just looking at your overall retirement savings total, you need to break down what your monthly and yearly income will be. You also need to understand what your tax burden will look like on withdrawing from your retirement accounts. Another piece to consider is healthcare costs; with age, you are more likely to have higher healthcare costs.
Do you know your net worth?
Taking inventory of all of your assets and liabilities is important to know your overall financial standing. These assets include cash, property, personal property, and investments. Also take a look at your liabilities such as mortgages, personal loans, and credit card debt. Understanding your debt will allow you to focus on paying off your debt before you reach retirement.
Do you have an emergency fund?
While you may have plentiful retirement savings, having readily available emergency savings is extremely important. A good place to start is with a three month savings of all of your expenses. You will want to have six months worth of expenses saved up in the long term. These expenses include everything from mortgage payments to insurance premiums. This savings is especially important in early retirement in the case there is an issue withdrawing from your retirement accounts.
Do you have an estate plan?
Having an estate plan is important in the case you are no longer able to speak for yourself or make your own choices. An estate plan can divide up your assets to your choice beneficiaries. Establishing your wishes and who will be your power of attorney is helpful in the case an unforeseen event happens. If you do not have an estate plan, be sure to develop a living will, a trust, and a will as soon as possible.
Do you have a financial advisor?
A financial advisor will be able to help you make all the decisions necessary before hitting retirement. From making sure you have enough to live off of in retirement to understanding your potential tax burdens, a financial advisor can help you make the right decisions for your money. Using a financial advisor to maximize your retirement savings and set you up for financial freedom is an excellent decision.
Sources:
https://www.extraspace.com/blog/life-transitions/retirement/things-to-do-before-retirement/
https://money.cnn.com/2018/09/17/pf/things-to-do-before-you-retire/index.html
https://www.kiplinger.com/retirement/602211/5-things-you-need-to-decide-before-you-can-retire