8 steps to stop working: your retirement countdown

As you begin to make retirement preparations, you’ll likely find yourself daydreaming more about what lies ahead. To ensure you’re ready, take these steps to make a smooth transition to retirement from the working world.

1. Check to see if your current savings match your future income needs
Ask yourself, “How much do I need to retire?” Check whether your current savings rate will enable you to get there. If there’s a gap, consider adjusting your mix of investments, increasing your use of tax-advantaged retirement accounts, consider investments that offer the potential of higher returns, and increase your savings.

2. Choose when to start claiming Social Security
You can start drawing Social Security payments when you reach age 62, but starting early means reduced payments. As you make retirement preparations, the longer you delay claiming benefits, the larger your payments will be. Delaying your payments past age 67 earns you a further increase in payments of 8% a year up until age 70, after which there is no further financial benefit to delaying payment.

3. Write your post-retirement budget.
After you transition to retirement, you’ll likely spend less on clothing and commuting. You may be free of mortgage payments, and stop funding retirement accounts. Some types of spending may increase, however, such as health care costs.

4. Decide where to live.
The transition to retirement often means moving time. This may be as simple as downsizing your house, or moving into a condo. But it could mean a move to another city or state, to be closer to your adult children or to live somewhere you don’t have to deal with icy sidewalks. Consider access to quality medical care, transportation, and the range and quality of services for senior citizens.

5. Plan for health coverage and long-term care.
Out-of-pocket medical costs often increase as you grow older. While you’re eligible for Medicare at age 65, this won’t cover all your expenses. Consider buying long-term care insurance to cover the costs of health care at home or in care facilities that aren’t covered by your regular health insurance or Medicare.

6. Review your retirement plans with an expert.
Getting some financial advice can help ensure you have all the bases covered as you make retirement preparations. Financial planners can review your personal finances, and may also alert you to different options and strategies you may not be aware of. For a review of how an advisor can help, read our article about a Certified Financial Planner.

7. Pay off those last debts.
If you have a mortgage, make paying it off a priority of your retirement preparation. Eliminating other debts such as car loans and credit card balances will also save you money on interest, simplify your finances, and reduce your retirement income requirements.

8. Discuss your work exit strategy with your employer.
Check your options with your employers as you transition to retirement, from working part-time, gradually reducing your working hours and responsibilities, or becoming a consultant on specific projects or subjects.

After you’ve worked through these steps, you’ll know with confidence when to retire. Then you can just sit back and enjoy a well-earned retirement.

(Bank of America)


Tags: ,

Posted by on Aug 19 2010. Filed under Retirement. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

You must be logged in to post a comment Login