Common Sense Financial Podcast
Episode 53 Six Steps to Ensure You’re Ready for Retirement
Sorting matters related to your retirement isn’t something you should wait until the last minute to take care of. What can you do to make sure you’re ready for retirement when time arrives? Learn about 6 things you can do right now to ensure that you’re indeed ready for retirement.
- If you are within six months away from retiring, there are certain things you need to do now to help prepare yourself for the transition into retirement throughout this retirement preparation process.
- While, at times, the retirement preparation process feels as if you’re making a series of rapid-fire micro decisions (Social Security benefits, Medicare options, pension elections, etc.), it’s important to understand that the decisions to be made are many and they have serious long-term ramifications.
- People often underestimate the complexities that exist when preparing for retirement and find themselves in over their head when making important financial decisions. Without understanding the long-term effects of one decision over another, a retiree may be well into the retirement years before the problem begins to surface.
- Retirement planning shouldn’t be viewed as a rapid-fire micro decision-making process. Rather, it should be viewed as a time to design a master plan that’s focused on what you can control. Then, protecting yourself from what you can’t control and considering very little as being in your control.
- You should develop an income plan, detailing exactly how much income you need to fund your retirement lifestyle. It may be tempting to skip this part, but you should keep in mind that your lifestyle will change along with your tax situation, which means that what you need now will not necessarily be the same when you retire.
- Another step is identifying your income sources and showing exactly how much income will be generated from each source to satisfy your annual income need. You should seek to know an exact amount from each resource you have.
- Most people begin to struggle because of a disconnect between their mindset around their assets and the need they have for them. There are generally two camps with this, those who focus on protecting the principal by holding onto cash, while others hold onto public markets and hopes for long-term growth, making it difficult to abruptly change how that money is handled and effort to generate income.
- Most people have money sitting in bank accounts, large amounts of equity in their home, and money combined together in public markets. This isn’t a good strategy as cash in the bank is not earning anything, equity in a home is not earning anything, and money in the stock market has varying levels of risk. None of which translates to having consistent income in retirement, to get a handle on this.
- You have to realize that the system or mindset used to accumulate assets is not the same system or mindset used to utilize those assets.
- Designing an income replacement plan to have in place for your spouse to cover the loss of Social Security or pension income is another crucial step.
- You should ensure that your legal documents designating the financial power of attorneys, medical directors, wills, trusts, etc., are updated. Most people kick this part down the road thinking they’ll have time to get this done later, and later means when they need it.