By Tom Sightings
There are a few issues you need to address if you're planning to retire. If you're already retired, and you haven't resolved them, you should get on them right away. If you don't take stock now, you risk letting your satisfying retirement slip away later on. A plan is essential for these aspects of retirement.
1. Do a rough draft of your retirement budget. You may not know exactly what your financial position will be in retirement, but you can make an educated guess. You may want to travel or your health care expenses may go up. Housing is likely to be your largest expense and an average of 40 percent of your budget, according to the Employee Benefit Research Institute. Maybe by the time you retire your mortgage will be paid off or you plan to move. Either way, figure out your housing and other major expenses. Then make sure your income from Social Security, IRA withdrawals and any other income sources such as pensions, alimony, rental income and part-time work will cover your costs. Try to match them up, at least within a 10 percent margin of error. If there's a big gap, it's better to know it now when you can still do something about it. And remember to figure in taxes. Withdrawals from a traditional IRA are taxable. Withdrawals from a Roth IRA are not. Your Social Security payments may be taxed, depending on your income. Do your research, so you're not surprised by less take home pay than you figured.
2. Determine your post-retirement investment plan. While you were working, your employer may have handled your investments, and they were probably focused on growth. Now is the time to shift to a more conservative asset allocation, perhaps by putting more money in bonds or selling your high-flying social network stocks and investing in lower growth but more stable telephone, utility or industrial companies. The idea is to keep a balance of investments that are not too risky or conservative and will offer the best odds of keeping the money flowing in your later years.
%VIRTUAL-WSSCourseInline-734%3. Start making plans for your new living arrangement. You need to discuss and plan for where you are going to live in retirement, which often involves downsizing or relocating. You can save a lot of money by moving to a smaller house in a lower cost neighborhood. But remember, it costs a lot of money to move, and finances are not the only consideration. Many people live where they live because of a job. But you don't have a job anymore, so you can live anywhere you want, even overseas. Do some research in advance, and try out any new location by spending time there before you move. You don't want to relocate only to find out you hate the place and want to move again. While many retirees have paid off their mortgage, some haven't. If you want to refinance, do it before you leave work. It will be easier to get a loan and take advantage of low mortgage rates while you are working.
4. Give yourself a health checkup. If you're retiring before age 65, figure out how you're going to get health insurance. Check and see if you can carry any of your company benefits into retirement. As you approach 65, do your Medicare homework. Even if you're still working, you may want to sign up, since there can be penalties for delaying. Also, take a realistic assessment of your health. Now that you're retired, maybe you can improve your lifestyle. A lot of people find that retirement comes with less stress and more time to take care of yourself. Perhaps now is the time to invest in a gym membership or some new clothes or equipment for biking, hiking, swimming or dancing.
5. Make a plan. Once your finances are in order and your future is secured, it's time to scope out how you're going to fill your retirement calendar. Sure, you're retired and want to relax, but you don't want to get bored and lonely. Now is your chance to try a new hobby, do some volunteer work, make new friends, join a club, learn a new sport or practice a new language. Your job now is to build a new life based on your own interests, rather than those of your old employer. It's time to step forward into a new lifestyle where you stay active and engaged with other people, and pursue a vision that brings you a greater level of personal fulfillment.
Tom Sightings blogs at Sightings at 60.
By Tom Sightings