The clock is ticking down to your last few weeks on the job. Congratulations! You’ve reached the end of a long career. So how can you make sure your retirement plans and financial future are intact? By taking some time to make a few preparations before clocking out for the last time.
Review Your Anticipated Budget
Take a realistic look at your expected expenses during retirement. Lay out an itemized monthly budget, including living expenses, travel, medical bills and unexpected emergencies.
Then, instead of focusing on the bottom line of your 401(k) or retirement account, focus on how long your money will last based on this expected monthly withdrawal.
Anticipate where your money will be coming from. Sources of income may include Social Security, pensions, your 401(k), IRAs and other accounts. Distribute your withdrawals so that you’ll be hit with the smallest possible losses. Traditional IRA withdrawals, for example, are taxable and are also subject to a 10% early withdrawal penalty if you’re younger than 59½ . Unnecessary withdrawals could cost you big at tax time and even bump you into a higher earning bracket.
Account for Health and Life Insurance
Medicare doesn’t cover retirees until age 65, so you’ll want to make sure there’s no gap in your health insurance coverage if you’re retiring before then. You may need some sort of coverage as a bridge between your employer’s health plan and Medicare.
As for your life insurance policy, you may be able to reduce your monthly payments by taking premiums from your policy’s cash value. Speak with your insurer about your options now that you’re entering retirement.
If you think you might want to refinance your mortgage, it’s best to do it while you still have a steady source of income. Refinancing may become harder once you retire, and creditors may not want to provide loans to those living on a fixed income.
The same goes for any other major purchases you’re considering, like a car or motor home.
Wait as long as possible for Social Security
You can file for social security as soon as you turn 62, but your monthly payments will be higher the longer you wait until age 70. For a married couple, deferring these withdrawals can lead to tens of thousands of dollars in additional Social Security income over a lifetime.
You can defer filing for Social Security by making withdrawals first from your other sources of income, like retirement accounts.
Find new hobbies and social outlets
Believe it or not, many people are surprised by feelings of loneliness when they’re suddenly not surrounded by their coworkers every day and don’t have an immediate task at hand.
Think about what you enjoy doing and pursue new outlets for those activities, like lessons, volunteering, travel, religious groups or hobby clubs. The happiest retirees are those who have found meaningful new ways to fill their time.