10 Steps to Take to Comfortably Retire
By Author Jane Saturday, November 02, 2013, 05:39 PM EDT
If you're approaching retirement age, you may be wondering about what you should be doing. You don't want to work too much after retiring, so you need to take steps to prepare for retirement now. Here are the steps you need to take to comfortably retire.
Determine Your Expenses
Retirement is a lifestyle change, so you need to be aware of your budget and the expenses you'll incur. Given the fact that you have more time now, it's extremely likely that your expenses will go up because of hobbies, travel and entertainment. If you move, that could significantly impact your expenses. Understanding what your retirement will cost is crucial.
Decide Where to Live
This is a huge factor in whether or not you'll be able to retire comfortably. If you stay in a home that's already paid off, your expenses will be significantly less than if you're still chipping away at your mortgage. If it's advantageous, you could sell your house and move to a condo.
The environment you're in will dictate your expenses; you need to have alternate plans. Most retirees decide to live in the same house that they retire in, but downsizing or moving to a cheaper area can free up some money.
Review Your Insurance Policies
Ensure that your coverage works for your upcoming lifestyle in retirement. Review your life, health, car, and homeowners insurance policies. You should make sure that you have prescription drug coverage and appropriate Medigap insurance, and upcoming changes in Medicare policy in mind.
Apply for Social Security Benefits
Three months prior to your 65th birthday, you should apply for Social Security. You can apply as early as 62 years and nine months, but your benefits will be reduced, depending on your retirement age and personal situation. Applying early can reduce your benefit by 20 percent or more.
Have a Retirement Income Plan
Once you retire, you need to have a retirement income plan. Life expectancy, distribution rate, inflation, health care, taxes, rate of return, and more can affect your plan. You may want to invest in a fixed annuity. Using annuity calculators, you can see exactly how much you'd be getting back. That way you can have a steady amount coming in.
Set a Retirement Budget
Building on the choice of where to retire, you need to figure out your expenses, your bills, and draw up a budget for your retirement. You need exact figures, not estimates. You should expect to spend 70 to 80 percent of your pre-retirement income. You'd be wise to dedicate a few months to setting a budget and trying to live off that amount.
Understanding Medicare Coverage
Medicare is broken down into two parts. Part A of Medicare helps pay for hospital, home health care, and hospice. Part B of Medicare takes care of doctor visits, outpatient care, and any other similar medical services. The Medicare application process, timeline, and premiums may vary depending on your age and whether you're currently receiving Social Security income.
Have a Savings Cushion
This should go without saying, but you should always have an emergency fund. While you won't earn anything extra when storing your money away, at least it'll be there. If the worst happens and you lose your job before retiring, you won't be at a significant disadvantage and have to sell off your assets or your house.
Arrange a Meeting With a Financial Planner
You're about to make a huge lifestyle change; you should not do this alone. Schedule a meeting with a financial planner so you can get a second opinion on everything you have set up. Look for a financial planner that specializes in post-retirement income calculations.
Get Your Estate Together and Make a Plan
Though no one likes to do this, it's an inevitable part of life. Your chances of being too sick or injured to make decisions rise as you age, so make sure you've updated your durable powers of attorney for both your finances and health care. You should also have a living will. In this, you should outline the kind of end-of-life care that you would want if you're unable to speak for yourself, that way the people you care about will have some idea of what you wanted. Be as specific as you can.
Though there are many other steps you can take, these are a few of the basic ones. Everybody's financial situation is different, so you should always get a second opinion with a financial planner. Are you close to retirement? If so, what have you done in preparation?
Author Jane is a freelance writer who loves to write about anything from tech to mommy stuff. She is featured in many blogs as a guest writer, and can write with authority on any niche or subject.