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The full article originally appeared on RickOrford.com and this truncated version has been republished with permission.
It’s never too early to start thinking about retirement. In fact, the more you do now, the easier retirement will be. Retirement can be a daunting prospect if you don’t have a plan. For example, do you know how much you’ll get from Social Security? And, will your money outlast you?
You can make sure that you have the money you need to live financially independent in retirement by planning ahead.
11 Things to Do before Retirement
This article will cover the 11 things to do before retirement. While much of this can be done on your own, a lot of it should be done alongside a professional.
1. Consider Your Housing Needs
Those about to retire should start thinking about whether they want to downsize or move to a retirement community. It’s best to consider your options and decide what’s best for you. If you plan on staying in your home, it’s often best to make sure that it’s paid off before you retire. If not, you’ll be stuck with a mortgage payment that could put a damper on your retirement plans.
It might also be a good idea to consider whether you want to move to a retirement community. These communities have many benefits that can make retirement more enjoyable. For one, you’ll be surrounded by people in the same stage of life as you. This can provide companionship and support during retirement. Retirement communities also offer social and recreational activities to keep you active and engaged.
2. Create a “Retired” Budget
Once you retire, your income will likely change. You will probably have less income if you’re no longer working.
The budget should include all your expected retirement expenses, such as housing, food, transportation, and healthcare. But don’t forget birthday and anniversary gifts, presents during the December global holidays, or even the odd gift to yourself.
Also, don’t forget to include a cushion for unexpected expenses. And don’t forget to account for inflation. These days, prices always seem to go up. So, you’ll need to make sure your retirement income can keep pace.
3. Calculate the Expenses You’ll Have to Make Once You Retire
One of the things to do before retirement is to calculate the expenses you’ll have once you retire. These expenses include things like housing, food, transportation, and healthcare. Indeed, costs will be different than they are now.
Consider the 50-30-20 rule. This rule suggests spending 50% of your income on essential expenses, 30% on non-essential expenses, and 20% on savings and debt repayment.
4. Save like Crazy
Retirement planning is all about saving as much money as possible now to have enough money later. The sooner you start saving, the more time your money has to grow. If you’re not already doing so, start contributing to a retirement account as quickly as possible. Social security will only get you so far. So, the earlier you start saving, the less you’ll need to save each month to reach your retirement goals.
Suppose your employer offers a retirement savings plan, such as a 401(k), make sure you’re contributing enough to take advantage of any employer matching contributions. Employer matching contributions are free money that can help you reach your retirement goals faster.
Even if you can’t contribute a lot each month, every little bit helps. The key is to start saving now and be consistent with your contributions.
5. Top Up Your Emergency Fund
An emergency fund is a separate savings account that you can use for unexpected expenses.
Experts agree to save 3-6 months’ worth of money for living expenses. This will help you cover unexpected costs, like medical bills or home repairs.
You can open an emergency fund account at a bank or credit union. And, be sure to look for an account with low fees and a reasonable interest rate.
6. Keep Adding to Retirement Savings
Just because you’re retired doesn’t mean you should stop saving for retirement. If you can do so, keep contributing to your retirement savings. If you have earned income, you can even continue contributing to your traditional and Roth IRAs.
Together with your financial advisors, you can determine the best time to start withdrawing from your retirement savings accounts.
7. Get Out of Debt
Debt can be a retirement killer. If you’re carrying a lot of debt, it’s essential to get it paid off before retiring. Otherwise, you’ll be stuck with monthly payments that could damage your retirement plans.
One of the fastest ways to get out of debt is to start by reducing your credit card usage. Doing so will reduce your monthly expenses and allow you more money to save for retirement.
There are a few ways you can reduce your credit card usage.
- Use cash instead of credit,
- Transfer your balance to a lower interest rate credit card (To save on interest), and
- Set up a budget and stick to it.
You can use the debt snowball or debt avalanche method to pay off debt. With the debt snowball method, you first focus on paying off your smallest debts. With the debt avalanche method, you first focus on paying off your debts with the highest interest rates.
8. Seek Loan Forgiveness If You Still Have Federal Student Loans
If you still have federal student loans, you may be eligible for loan forgiveness. Loan forgiveness is when the government pays off your student loan debt. You may qualify for loan forgiveness if you work in a public service job or are disabled.
To learn more about loan forgiveness, visit the Federal Student Aid website.
9. Plan for Changes in Your Medical Insurance
If you’re retired or nearing retirement, it’s essential to plan for changes in your medical insurance. You may be eligible for Medicare, but it’s vital to understand your coverage and its cost. Also, be aware of the gaps in Medicare coverage to plan accordingly.
You may also want to consider purchasing a supplemental insurance policy to help cover your health care costs.
10. Improve Your Social Security Knowledge
If you’re retired or nearing retirement, it’s essential to understand how Social Security works. This includes knowing when to start taking benefits and the amount of fixed income you can expect from Social Security benefits.
Social Security provides a fixed income for your entire life that can help cover your living costs. The amount is based on your earnings history. The more you’ve worked and the higher your income, the more significant your retirement benefits will be.
Also, Social Security can start sending your fixed income benefits as early as age 62. But if you wait until your full retirement age, which is between 66 and 67 depending on when you were born, your benefits will be larger.
For each year you delay taking benefits past your FRA, your benefits will be increased by about 8%. So if you wait until age 70 to start taking benefits, your benefits will be about 32% higher than if you had begun taking them at FRA.
You can get all the information about Social Security benefits at the official website, www.ssa.gov.
11. Learn How Medicare Works
Medicare is a health insurance program for people 65 and over. If you’re retired or nearing retirement, it’s essential to learn how Medicare works. This includes knowing what’s covered and what’s not covered.
Medicare is a helpful program because it covers some healthcare costs that people may not be able to afford on their own. This includes hospital stays, doctor visits, prescription drugs, and preventive services.
Medicare also offers peace of mind. It’s one less thing you have to worry about when it comes to your healthcare. And you don’t have to worry about losing your health insurance if you retire.
You can get more information about Medicare at the official website, www.medicare.gov.
Final Thoughts
Retirement may seem like a long way away, but it’s never too early to start planning for it. Preparing for retirement means making sure you have enough money saved up today to live comfortably in the future.
As discussed in this article, it’s crucial to think about both the financial and emotional aspects of retirement to enjoy your retirement years to the fullest.
The post Things to Do before Retirement: 11 Point Checklist appeared first on Credit.com.
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