When you were 21, it seemed so far away. They even used a calculator to count the days and weeks until retirement. Now you’re 60 and retirement is on the horizon, and you need to consider your financial moves.
According to data from the US Census Bureau, the average American man retires at 65, while women retire at 63. Depending on the month of birth, social security pays full pension benefits between the ages of 66 and 67.
Either way, after five years, it’s time to take one last long look at your situation and consider those financial steps you need to take just before you retire.
Increase your cash reserve
A well-funded savings, checking, and/or money market account with three to six months of living expenses will serve you well if there’s a delay between the time you apply and the arrival of your first check from Social Security, your IRAs, and 401(k). . s.
Of course, you should always have an emergency fund on hand anyway to deal with possible unforeseen situations. Congratulations if you’ve gotten this far without needing one, but you definitely want to set it up now while you’re still earning.
Get a feel for your cash flow
Since you no longer have to commute to and from work, your weekly expenses will go down a bit. However, your maintenance costs will likely increase somewhat as you have more time to pursue your hobbies.
Take some time to calculate your income and compare it to your projected expenses so you can make the necessary adjustments to keep things flowing well. If the numbers don’t add up, you may decide to delay retirement a bit or consider partial retirement to fill the gap.
repaying debts; to repay debts
Retiring debt-free has a number of benefits. Most important among them is the fact that you will be debt free! Seriously, your money has a lot better uses than servicing debt when you stop working.
A window of five years is enough to clear up a lot, even if you are in a situation where you need professional help to make it happen. Research information like these Freedom Debt Relief reviews before making your decision to ensure you choose a reputable company if you choose to go down this route.
Reduce your expenses
This goes hand in hand with the above. It’s time to eliminate waste. Do you really need the complete cable package for the boat? Streaming videos is cheaper and offers more programs than you can ever consume. In addition, a digital antenna will provide you with all the local news and information you need.
Still need that four bedroom house you bought while raising your family and filing tax claims? Downsizing into a condo will significantly reduce your potential maintenance and utility costs. Take a critical look at all of your expenses to decide what you can eliminate without drastically impacting your quality of life.
Check your tax situation
You could face capital gains penalties if you sell this four bedroom home. The liquidation of your company shares can also have tax consequences. All too often, retirees underestimate their tax burden.
Now it’s time to sit down with your accountant to determine what steps you need to take to ensure you’re preserving as much of your money as possible while remaining compliant with the law.
Adjust your investments
It’s time to shift your investment strategy away from growth and more toward income. That means reducing the volatility of your portfolio. Many people live 20 to 30 years past retirement, so you need to make sure your investments will take you that far.
Take out long-term care insurance
It is estimated that about 70 percent of Americans age 65 and older will require some form of long-term care at some point. The need typically lasts about three years and the cost can decimate a spending plan. Long-term care insurance can save your nest egg when a long-term illness strikes you or your significant other.
If you take these financial steps just before you retire, you’ll embark on your journey to your golden years with a more secure income.