Retirement once seemed like a far away dream. But with the quick passage of time, that dream now looms in the not-too-distant future. Now the big question isn’t when you’ll retire, but if you’ll even be able to while pursuing the lifestyle you’ve always pictured.
We all know that smart retirement planning starts when you first enter the workforce. However, as your retirement date approaches there are a number of smart things you can do to make sure all those years of hard work and sacrifice pay off. Here are 5 important steps to consider before you clock out at work for the last time.
Pay Off Debt
Heading into retirement debt-free provides extra peace of mind.
So, as retirement gets closer, paying off debt should be a primary focus. The best way to go about it is to start with those debts that carry the highest interest rates, such as credit cards. Always pay those credits cards with the highest rates off first and pay down the card with the lowest rate to keep it on hand if you need it.
Car loans, which typically carry higher interest rates, are next in line, followed by home equity loans. Paying off your home mortgage can also be a good step, but it’s best to check with an investment professional first.
The key is to pay off debt without having to tap into your existing retirement accounts.
Prepare a Retirement Budget
Prior to retiring, it’s critical to prepare a budget or spending plan based on what your actual income and living expenses will be once you’ve left the workforce.
Be sure to factor in expenses you will no longer have in retirement, such as money spent on buying lunch, money spent on the daily commute, or money spent on uniforms and work clothes.
While your retirement income may not be as much as your pre-retirement income was, the savings gained from no longer working could help make up the difference.
Consider Future Housing Needs
People looking to retire should consider two basic housing options well in advance.
The first option is to sell the large home and downsize to a more affordable and more manageable place of residence. This choice can have major advantages in later years, especially for those who have large multi-level homes that can be expensive to maintain and where stairs will eventually become difficult to negotiate.
The other option is to renovate to include features such as walk-in bathtubs, shower seats and lever-type door and tap handles, which will make the house more liveable and enjoyable in your later years.
Evaluate Life Insurance Needs
Hopefully during your peak earnings period you took out a life insurance policy to protect your spouse and family financially in the event of your early death. If that’s not the case, then you’ll discover that life insurance can be expensive when you’re nearing retirement age.
However, depending on your current assets, a life insurance policy may be an invaluable part of your estate plan. There are a number of companies that offer life insurance at competitive rates to individuals up to the age of sixty-four. If your sixty-fourth birthday is not far off, this is something you could consider.
Plan to Retire to Something
Did you enjoy golfing or fishing or stamp collecting in your leisure time while you were working?
Believe it or not, these activities may actually become tiresome once all of your time is leisure time. Studies show that people who retire to something that gives them the structure and sense of purpose that their jobs once provided are much more likely to be happier and live longer than those who retire without such a foundation.
Whether it’s working part-time to earn extra income, or volunteering your time and energy to a worthwhile organization, you’ll want to find something to do that keeps you active, engaged, and feeling relevant and vital during your retirement.
After all, just because you’ll no longer be working in your career, it doesn’t necessarily mean that you should take up residence in front of your TV for the duration of your golden years.