Are you planning to retire soon? Follow this checklist to prepare well


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The decision to retire shouldn’t be taken lightly — it’s a huge lifestyle change and there are many risks associated with it. Indeed, research shows that up to 75% of Americans believe the country is facing a retirement crisis.

With that in mind, you’ll need to weigh each of your options, plan carefully to get your affairs in order, and choose an appropriate time to take the plunge.

Here are seven important things you need to think about before making a final decision about your retirement in the near future.

1. Are you selling a business?

Planning for retirement is much more complicated when running a business. While an employee can completely detach from their old work life once they hand in their leave and say goodbye, business owners usually have a lot more skin in the game.

You will need to name a successor, who could be a family member or an existing employee, and develop a detailed business plan to prepare your business for its new owner.

Other important factors to consider are how to extract the money you have invested in the business over the years, your future involvement, and the possibility of selling part (or all) of the business to a external investor.

2. Will you continue to work to some extent?

More … than 50% of Americans plan to continue working after retirement. Although insufficient savings is the reason cited by 35% of people, there are several other advantages to staying employed.

Continuing to work to some degree can help you maintain your focus, stay active, keep your brain engaged, and maintain a busy social life.

One option is to take phased retirement, which means that you will gradually reduce your working days. Other retirees pursue roles in the gig economy or choose to volunteer.

3. What will you do during your retirement?

Do you hope to spend the first years of your retirement traveling the world via first-class flights? Or does a happy retirement for you look like a secluded cottage in the countryside?

Your lifestyle requirements will dictate when you can retire. Are you willing to make sacrifices (like downsizing at a smaller property) to fund early retirement, or is your usual comfort worth a few extra years in the workplace?

Decide who your dealbreakers are and work out an annual budget, leaving some wiggle room for mistakes and emergencies. As much as 43% of American workers guess how much they need to retire, rather than basing their predictions on current expenses or using a retirement calculator. For reference, in 2020, the average annual spending of Americans aged 65 and older was $47,579.

There are various retirement calculators available online, such as this onewho can help you plan the financial aspects of your retirement.

4. How much money do you have?

Start by taking a detailed inventory of all your assets. This should include all debts, personal savings, inheritance, current income (such as rental payments for properties you own), vehicles and valuables.

Next, check how much money is tied up in your workplace retirement plans (eg, a 401(k) plan) and/or your individual retirement account). While there are certain tax shields in place that make both of these retirement plans attractive, you’ll need to think about how you want to withdraw that money when you retire. For example, do you want to take a lump sum or receive monthly payments? You have the ability to move some of your money. For instance, transfer some of your 401(k) contributions to a Roth 401(k) could help you avoid hefty tax bills once you start withdrawing money.

Once you have calculated your occupational pensions, it is time to find out how much social security you are entitled to. Approximately a third of the active population and 50% of retirees expect Social Security to be their main source of income after retirement. This retirement estimator will calculate a benefit amount for you based on your Social Security earnings.

Finally, don’t forget to take inflation into account, especially in the current circumstances. Your savings pot will not be worth what it is worth today in 10 or 20 years.

If the prospect of managing your finances seems overwhelming or confusing to you, it may be worth consulting a financial advisor.

5. Do you have adequate health insurance?

Post-retirement health care is likely to be a significant expense and should be factored into your budget planning.

In 2020, for example, the Bureau of Labor Statistics Consumer Expenditure Survey reported that health care for people aged 65 and over cost $6,749/year. After age 65, you can rely on Medicare for many of your needs, but make sure you understand the exemptions. It’s also worth reviewing your current health insurance plan and exploring other options.

6. Have you repaid your debts?

Assuming that your income will drop significantly once you retire, ideally you would like to be debt-free. Any fixed-term payments will represent a significant portion of your monthly expenses and leave you with less disposable income to enjoy in retirement.

If it’s not possible to pay off all of your debts before retirement, try to get the upper hand on those with the highest interest rates, such as credit cards and personal loans.

7. Trust your instincts

The most important thing to keep in mind as you weigh your options and start putting plans in place is that putting together a retirement plan is an extremely personal process.

While it’s essential to be rigorous and realistic when it comes to financial planning, just about everything else is totally subjective. Don’t lose sight of what you want out of retirement or the things that make you truly happy.

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