Retirement should be like a second childhood … without parental supervision. I believe that’s doable for most people, but it takes planning.
Luckily, you can begin right now by taking these steps:
No. 1: Decide where you want to live.
Think about the retirement lifestyle you desire, and find a location that supports it. If you want to travel, you may opt to downsize to a condo. If you want peace and quiet, a small town could be the ticket. If you want to have more money at your disposal, you might want to move somewhere with lower taxes and a lower cost of living.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
No. 2: Practice retirement now.
After you retire, you no longer have somewhere to go every day. You’re cut off from your typical social network. It can be a surprisingly difficult time. Try to avoid post-retirement depression by contemplating what you want to do and beginning it now.
Would you like to volunteer for your church? Start now. Interested in teaching for a university? See if you can teach a class now. By practicing your retirement, you can find out what you really want to do (it may not be what you think), and meet new people, too.
No. 3: Retire your debt.
I believe that when you are retired, so should your debt be retired. If you have no mortgage, no car payment and no credit card debt, most of your expenses will be variable costs you can control. Wouldn’t that feel great? Want to begin now? Make a list of all your debts, then rank them by highest interest to lowest. Depending upon the terms and conditions of the loans, it usually makes sense to start paying off the highest interest debt first and work your way down until you have paid off all your debt.
No. 4: Reconsider your risk profile.
Once you’re five years away from retirement, I believe you need to adopt a defensive investment philosophy. You may have invested more aggressively while you were growing your money. However, now would be the time to diversify and reduce your risk to help avoid losing a big chunk of your retirement to a bear market. We recommend and often employ several defensive strategies with our Money Matters clients, such as rebalancing their portfolios quarterly; reducing their exposure to equities; and creating stop-loss strategies to mitigate downside risk.
No. 5: Think about health care.
It's an unfortunate fact of life: Health care becomes more critical (and potentially expensive) as we age. Don’t forget to include it in your plans, especially if you want to move or travel extensively. For example: Medicare may not pay for expenses incurred outside of the United States, so you might consider buying a private insurance policy to fill that gap.
No. 6: Make a budget.
How much money will you need to support the lifestyle you want? I suggest you come up with two numbers. The first is the amount you need to cover the things you need, like food, housing and health care. To get your second number, add the costs of the things you want — like travel or a club membership. Create a financial plan that gives you a high probability of achieving the necessities, and then add the luxuries if possible.
No. 7: Apply for Social Security ahead of time.
If you’re waiting until your full retirement age to collect Social Security, it’s recommended that you apply at least three months before you want your benefits to start (you may apply as early as four months before your full retirement date). Make sure you have all the documentation needed. You can find a list of required documents here.
No. 8: Consider rolling over your 401(k).
After years of pumping money into their 401(k)s, workers approaching retirement have some decisions to make. Transferring money out of a 401(k) to an IRA could increase investment options, allow for more flexible estate planning and offer more distribution options.
When making any decision about moving your money, make sure to take into consideration your age, current financial status and costs involved. It may not be the right time for you to roll over your 401(k), but it is the right time for you to study your options.
-
Veterans Could Lose Food Benefits Under Trump’s Tax Law: What to KnowFood Benefits Veterans up to 64 years old must work to keep food stamps under Trump’s new tax legislation.
-
Want to Retire at 67? See if You Can Answer These Five QuestionsRetirement is within your reach. But before you leap make sure you are ready by answering these five questions.
-
Fall Is Tax Time? Yes! Act Now to Make Needed AdjustmentsReview your withholdings, contribute to tax-saving HSA and FSA accounts, manage a bonus' impact and adjust for major life events such as weddings and job changes.
-
Board Service in Retirement: The Best Time to Join a Board Is Before You RetireMany senior executives wait until retirement to take a seat on a corporate board. But making this career move early is a win-win for you and your current organization.
-
A Financial Professional's Take on Long-Term Care Insurance: Buy or Not?Unless you have about $6,000 burning a hole in your pocket every month, you should make a plan in case you need long-term care. Luckily, you have options.
-
How to Unearth Sustainable Investment in Mining: A Financial Professional's GuideMining is likely to play a critical role in the global transition to more environmentally friendly energy resources. Here's how you can balance the opportunities and the risks.
-
Don't Be a Sucker: The Truth About Guarantor and Cosigner AgreementsThere are significant financial and relationship risks involved if you agree to be a cosigner or guarantor. Make sure you perform your due diligence, and know exactly what you're getting into, before agreeing to such a commitment.
-
The Hidden Risk Lurking in Most Retirement Plans: Human BehaviorWhat's one of the differences between a good financial adviser and a great one? The ability to use behavioral coaching to guide clients away from emotional decision-making and toward retirement success.
-
Addressing Your Clients' Emotional Side: Communication Techniques for Financial AdvisersRather than focusing only on financial plans, you can better serve your clients — and grow your business — by learning what to say and do when a client gets anxious or emotional.
-
Seven Hidden Downsides of Dividend Investing, From a Financial AdviserDividend investing could be draining your wealth with unexpected costs and limited growth potential. Here are some downsides, along with smarter strategies to take control of your retirement income.
