We all wish preparing for retirement was as simple as saving money and choosing your last day of work. Unfortunately, there is a lot of planning and decision-making that goes along with the process. While being overwhelmed with pre-retirement checklists, it is far too easy to overlook the important steps you need to take when nearing retirement age.
Avoid being caught off guard by focusing on these important steps to help prepare you for this challenging transition in your life.
1. Ensure Your Expectations Align With Reality
Making decisions based on overly generous expectations is frequently the source of a lot of post-retirement problems. Your dreams for the future may cause you to overestimate and assume best case scenario results for your retirement. Sadly, reality is unforgiving for those that are unprepared and ill-equipped. Just as a fresh set of eyes can notice things you miss, a professional financial planner can recognize problems and get you on the right track to securing the future you deserve.
2. Eliminate All Your Debt
Retiring with a large amount of debt can be just as bad as retiring with inadequate savings, the result will ultimately be the same, although the former will likely hit you more quickly. Paying off the last couple years of a reasonable mortgage is not the end of the world, so don't worry about soon to end debts. High-interest debt that will stick around can drastically impact your plans and should be dealt with well in advance whenever possible.
3. Test Your Retirement Budget And Expenses
Few people take advantage of the early warning that budget testing provides to those planning on retiring within the next year. The best time to attempt budget testing is at least a year in advance of the age you plan to retire. This will give you ample time to make the corrections necessary if you realize your estimations are off. Ideally, you should test for a minimum of 2-3 months to truly get a feel for the budget restrictions. Bear in mind that your free time once you retire will no doubt increase so estimate the cost of hobbies, activities and eating out when determining if you can survive your budget.
4. Set The Groundwork For A Plan B
When most people devise their path to retirement, it is the only plan they make. Unfortunately, life happens and things do not always go the way you expected. It is not necessary to have a backup plan that is fully fleshed out from the ground up, and no one would blame you if you failed to do so. Having a general idea and place to start, however, is just one step you should take for any decision as large as this. Whether you take large steps such as additional investments, or smaller ones like leaving generous downward wiggle room in your budget for unexpected expenses, a plan b can be a lifesaver.
In many ways the preparation for life after you retire is harder than the act of retiring itself. Effective planning, or lack thereof, can make or break your future. There is more to the preparation phase than simply saving money so meeting with a professional financial planner with a wealth of experience in retirement planning may be exactly what you need. Contact our friendly team at BD Financial Concepts for a personal look into your options for guaranteeing a successful retirement.
This article may contain concepts that have tax, accounting and legal implications. This material is for informational purposes only. It is not intended to provide tax, accounting or legal advice or to serve as the basis for any financial decisions. Individuals are advised to consult with their own accountant and/or attorney regarding all tax, accounting and legal matters. Neither Global Financial Private Capital, LLC nor its Investment Advisor Representatives are so qualified and, as such, do not provide tax or legal advice. If you base a decision on information contained in this article, you will be solely responsible for that decision.
We are a professional financial services firm located in Sanford, Central Florida.