Many people spend their whole lives passively preparing for retirement, but the older you get the more important it is to flesh out your specific plans. Even if you feel pretty confident about your financial situation, retirement is still a huge financial and mental adjustment that you should be preparing for. Here are five of the most important things to consider before you quit your day job.
- Is your investment portfolio in order?
- It’s common to rebalance your portfolio at least once a year at any age, but the choices you make as the time passes should change. As you approach retirement, you should be thinking more about protecting your savings and less about risk taking. It’s harder to recover from financial losses when you no longer have a steady income and are not adding money to your portfolio. The time to take risks is in your younger years. Once you’re in your 60s, you should sit back and prepare to reap the benefits of all those chances you once took.
- When should you begin collecting Social Security?
- You could begin collecting at 62, but should you? Many people argue that you should not. This is because you can receive an extra 8 percent for every year you delay collecting Social Security between the ages of 62 and 70. Patience truly is a virtue and it really is this simple; the longer you can wait, the more money you can get and the greater the probability of it lasting to your life expectancy.
- What is your health coverage going to look like after retirement?
- There are a few options when it comes to health care during retirement, but Medicare is one of the most common forms of coverage. You can enroll up to three months before turning 65. But keep in mind that Medicare does not cover dental, vision, or hearing! So the closer you get to retirement, the more important it is to make sure you’re going to your regular appointments while you’re still on your employer plan and you’re still making your normal income. These years are really important when it comes to focusing on your health.
- Are you emotionally prepared for retirement?
- It’s pretty common for people to get all their metaphorical ducks in a row before retirement and yet still struggle with the transition. You have to keep in mind that you will no longer be going to the same places, doing the same things, and seeing the same people that you have been for years. Once you’ve gotten your finances figured out, you should consider what kinds of projects, hobbies, and travel you might want to fill all your future free time with. Whatever you do, don’t forget to socialize! Staying in touch with your family and friends does wonders for your mental health during a big life change.
- Have you done an accurate evaluation of how long your savings will last?
- Before you retire, work with a professional to map out your financial future in retirement and include your spouse or partner in the process. Although you can’t plan for the unexpected, you can go into retirement with a realistic assessment of how long your savings will last.
Most importantly, get excited! This phase of life can be scary, but it should be fun. Whenever you’re feeling nervous, reach out to your financial advisor. They’re great at putting their clients minds at ease, as well as actually addressing potential financial bumps in the road to retirement.