8 Things to Plan for Before Retiring

Retirement is an exciting and daunting time of life. After decades of work and saving, you’re finally ready to exit the workforce gracefully. Of course, the transition isn’t always as simple as TV advertising would make it seem.

Finding the right balance of investments such as retirement annuities alongside your savings and financial planning can be difficult and time-consuming. But, we’ll help you navigate the online confusion about retirement to simplify the top 10 things you should focus on, whether you’re 1 year away from retiring or 10.

What Should I Focus on Before Retirement?

Before you retire, it’s essential to focus on several different areas, including your family matters, personal savings, and investments, to sustain yourself for long and happy golden years.

1. Running the Numbers

First and foremost, you should see what your potential retirement income will be. You can see your social security plan, pension plans, and other retirement options and savings to do so. A general rule of thumb is that retired persons can afford to spend 4% of their portfolio annually. Of course, your rate of withdrawal should also take your age, gender, risk tolerance, and lifestyle into account.

To this effect, you’ll want to consider the timing of your retirement. Retirees later in life can withdraw more, allowing for more discretionary expenses. If you can defer your social security payments, you receive additional benefits later in life. The longer you wait, the more you’ll have available when you come to crack open your nest egg.

2. Choosing Your Standard of Living

Budgeting is important even after retirement. Once you’ve figured out your income sources, investment benefits, and retirement contributions, it’s time to get down to the details. Your day-to-day decisions are important to avoid the risk of outliving your savings.

Consider the following questions:

• Are you moving after retirement?
• Are you expecting any major medical or personal expenses?
• Do you have any debt entering retirement?

Budget carefully, especially in the year before you retire, to make sure you’re building your savings and keeping your finances sound.

3. Making Wise Investments

If you’ve invested across the board throughout your career, you may have a diversified portfolio before you retire. Whether you’ve dabbled or invested heavily, consider divesting resources from high-risk stocks and gear towards stable, low-yielding stocks.

You should also carefully choose your stocks based on liquidity needs and the timeline of when you’d like to cash out your investment. Consider your income sources and risk tolerance carefully to make the best decision. (1)

4. Maximizing Your Retirement Accounts

Several social security measures are in place to protect and support retired persons, but the age-old saying “you get out what you put in” holds true here. If you can, max out your retirement contributions on your 401(k), IRA, or other retirement plans as necessary.

Doing so is beneficial and allows you to reap the benefits when you properly retire. Similarly, you should simplify your investments by consulting with a tax professional or investment advisor. These resources can be beneficial to ensure you get the most from your retirement, both from your employers past and present, and from account consolidation.

5. Reducing Debt

Debt closer to retirement can be toxic and negatively impacts your savings during retirement. Increase your mortgage payment if necessary to ensure the loan is paid off before you retire; otherwise, you still have compounding debt and interest taxing your income even when you’re not earning.

In a similar vein, pay off credit card debt and reduce big purchases, especially in the year before retirement. Doing so helps keep you financially responsible and eliminates the risk of monetary obligations after retirement.

6. Finding an Annuity

A retirement annuity can be an effective strategy to ensure you don’t outlive your savings, transfer your funds to a beneficiary when you pass, and guarantee your income. An annuity provides you with regular income and allows you to tax-defer your contributions, meaning that you spend less on taxes when you withdraw, as your tax bracket will likely change upon retirement.

If you’ve built up a significant lump sum of money, for example, then you might consider an immediate annuity, which pays out a fixed income over a set period of time, usually within 12 months of your initial investment.

A deferred annuity, on the other hand, gives you the option to annuitize funds at a later date, giving you the ability to pay into it over a period of time. Of course, most deferred annuities still allow you to buy in with a lump-sum investment.

7. Tending to Personal Matters

Retirement is a wonderful opportunity to spend more time with friends and family; however, it’s worth preparing yourself mentally for retirement through clear communication and expectations. Many retirees focus solely on the financial aspect of retirement and forget to plan their time.

As such, focus on yourself before you retire. Find an enjoyable hobby, fulfilling activities, and community in your life of leisure. Work is truly satisfying, but transitioning from work to leisure is challenging.

8. Communicating Your Intentions

Lastly, communicate with your spouse and family about your retirement plans. Doing so can help them adjust to the change, avoid disappointment, and facilitate your transition smoothly. Discuss your hopes and dreams, preferably at least five years out, and inform your family of your intentions.

Set boundaries where appropriate, but don’t forget to enjoy the time with kids and grandkids that being retired affords you.

The Bottom Line

Preparing for retirement is daunting, especially when the big day seems fast approaching. Hopefully, we’ve given you some valuable guidelines to streamline the retirement process and ensure your financial and personal effects are in order for your golden years.

Budget and plan your investment strategy to match your risk tolerance and the amount you can feasibly withdraw. Don’t forget to communicate your intentions with your spouse and family members. Finally, don’t forget to carve out time for yourself and your family. Develop new personal interests and hobbies to enjoy your retirement and commit to being a part of your kids’ lives as they achieve major life milestones. (2)