5 Things you must do before you retire…….
by Maurie Backman for the Motley Fool @CNNMoney September 2018:
If you're looking forward to retirement, you're not alone. Countless workers dream of leaving their jobs behind and enjoying the freedom of unstructured days. But before you pull the trigger on retirement, be sure to tackle the following moves so you don't come to regret your decision later on.
- Assess your personal savings
Hopefully, you spent much of your working years socking away money in an IRA or 401(k). If you're thinking of retiring, now's the time to assess your balance and see what it actually means in terms of usable day-to-day cash. It's easy enough to look at, say, a $500,000 IRA balance and think, "Wow, that's a lot of money." But if we apply a 4% yearly withdrawal rate, which has long been the standard, that $500,000 translates into just $20,000 of annual income, give or take some adjustments for inflation.
Of course, that figure doesn't account for other income sources you might have at your disposal, like rental income or earnings from a part-time job. It also doesn't factor in Social Security. The point, however, is to look past the figure you see on your retirement plan statement and determine how much income it'll actually give you in practice.
- Map out a retirement budget
Maybe you're used to following a budget and tracking your spending diligently. While that's certainly a positive habit to celebrate, once you stop working, your expenses are likely to change — for better and for worse. While you might save money on things like commuting and transportation (retiring might allow you to downsize from a two-vehicle household to a single vehicle, thereby saving money on maintenance and insurance costs), you might spend more money on things like leisure, since you'll have additional free time on your hands.
Before you retire, create a new budget that details the expenses you expect to encounter once your career comes to a close. You'll probably have to tweak that budget as you go along, but having one in place will give you a good sense of whether your nest egg will suffice during your golden years, or whether you'll need to save more money before making your retirement official.
- Read up on healthcare costs
We all know that healthcare can be expensive at any stage of life, but you may be shocked to learn that the average 65-year-old man today will spend $189,687 on medical care throughout retirement, while the average 65-year-old woman will spend $214,565. Ouch. Worse yet, these figures don't account for long-term care — something 70% of seniors 65 and over are statistically likely to need.
The good news, however, is that the more you educate yourself on what senior healthcare costs might look like, the better equipped you'll be to manage and keep them to a minimum. Along these lines, it pays to look into long-term care insurance, which can help defray some of the astronomical costs seniors face when they inevitably wind up needing nursing home or assisted living care.
- Develop a strategy for claiming Social Security
If you're like most seniors, Social Security will come to provide a large portion of your retirement income. But while your benefits themselves are calculated based on how much you earn during your career, the age at which you first file for them can cause that number to go up, go down, or stay the same. That's why it's important to create a strategy for claiming benefits rather than go in blind.
For example, if you file for benefits at your full retirement age, which is either 66, 67, or 66 and a certain number of months, you'll get the full monthly benefit you're entitled to based on your work history. If you delay past full retirement age, your benefits will get a boost. And if you file before full retirement age, you'll face a reduction in benefits, but you'll also get your money sooner. There's no right or wrong answer when it comes to choosing a filing age, but what you should do is know your full retirement age and understand the consequences of claiming benefits at various points in time.
- Figure out what you'll do with your time
Though the idea of having all the free time in the world might seem appealing, once you find yourself in that situation, the reality might hit you hard. The truth is that it's difficult to go from a full-time work schedule to a total lack of structure, which explains why so many retirees ultimately fall victim to depression.
If you'd rather avoid that fate, come up with a plan for spending your newfound free time, and make sure it aligns with your budget and income. You might think you'll go golfing twice a week and travel once a month, but if your savings can't support that lifestyle, you'll need to come up with a different plan.
Retirement can be an exciting and fulfilling period of life, provided you prepare for it. Make these key moves before calling it quits on the work front, and with any luck, you'll wind up making the most of your golden years.