Perhaps you set a retirement date years ago, but as that time gets closer, anxiety might come creeping in. Retirement is a major life change, so it’s normal to feel nervous about it. If you’re wondering whether you’re really ready to enter this next stage of your life, take these steps to assess your readiness.
Evaluate your living expenses. Your lifestyle might shift dramatically once you enter retirement. For example, you might save money on commuting, work clothes, lunches out, and so on. On the other hand, you might wish to pursue expensive hobbies or travel. Evaluate your expected retirement budget before you make the leap.
Review your retirement income. Will you be receiving income from Social Security, an annuity, your Thrift Savings Plan, or some other form of income? Do you plan to work part-time? Include your spouse’s retirement income, if they have any.
Consider your income taxes. Your income tax situation is likely to change in retirement, due to the different ways that retirement accounts are taxed. Also, if you plan to begin a second career or work part-time, some of your Social Security benefits could be taxed. If you plan to move to a new location, you might face new state and local taxes.
Pay attention to the cost of health care. Health care is often the largest expense faced by retirees. The cost of health care rises each year, and that means your co-payments and deductibles might increase as well. Leave room in your budget for these growing costs, and remember that situations such as long-term nursing care can eat an even bigger hole into your budget.
Pay down your debts. If you can, enter retirement as free of debts as possible. Taking this step will give you the ability to more freely modify your budget in the event of an emergency. Even if you have to work a few years longer, it’s worth it to enjoy a more carefree lifestyle.
Save more in the years before retirement. If you’ve paid down your debts, save as much as you can prior to retirement. Stash extra funds, such as income tax returns, in your retirement account. You might even exceed your original retirement savings goal; there’s nothing wrong with that!
Meet with a qualified financial advisor. Call us for an appointment in the years preceding retirement, and we can help you asses your plan, make the necessary adjustments, and stay on track toward a stable financial future. Retirement is a major life transition, and expert advice can make the difference between a bumpy ride and a smooth one.
