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Countdown To Retirement
Are you counting down the days to retirement? Is it just
around the corner? A few months, at most a few years? Here's
a checklist from the Financial Planning Association to help
you make a successful transition into the next stage of your
life.
Think about what you want to do in retirement. Many
people enter retirement without a clue what they want to do.
Do they want to work part time? Pursue a hobby? Volunteer?
Travel frequently? Their choices not only have implications
for the quality of their retirement, the choices have a profound
impact on the cost of retirement and whether retirees have
sufficient money to fund the lifestyle. The earlier you can
start thinking seriously about how you want to live in retirement,
the better.
Discuss it with your spouse. You and your spouse may
have different visions about retirement, or you may be retiring
at significantly different times. Discuss how you can accommodate
these differences well before you actually retire.
Determine what retirement will cost. The rule of thumb
is that you need 70 to 80 percent of your pre-retirement income
to live on during retirement. The problem with this rule of
thumb is that it may not closely match your needs. You may
envision a very frugal lifestyle, or a high-expense one. Err
on the high side. Studies indicate that people tend to underestimate
what they actually spend during retirement.
Assess your sources for retirement income. Even if
you're still five years away from retirement, make an
estimate of what income you can rely on during retirement.
How much will you receive from Social Security? From a company
pension? What do you have in your 401(k) or other retirement
savings? When you actually retire, will there be enough money
to fully fund your retirement? Or do you need to sock away
more now, perhaps work part-time for a while after retirement
or even delay retirement?
Prepare your portfolio. Start reviewing your portfolio
five years before your planned retirement to be sure you're
heading into retirement with the right mix of assets. You
don't want to be overloaded with company stock, yet you
don't want to abandon stocks entirely as you near retirement
because you'll still need some growth to stay ahead of
inflation.
Plan asset rollovers. You may want or need to roll
assets out of your company retirement plan upon retirement,
or shift other retirement assets. Plan your tax and allocation
moves before you retire. Managing retirement resources can
be critical to the survivability of those assets over your
retirement lifetime.
Watch your spending. Couples approaching the last
five years before retirement tend to experience what's
been called "lifestyle creep." With their income
often at maximum and many of their traditional expenses such
as children and a mortgage gone, they tend to spend the surplus.
Consequently, they have a higher pre-retirement lifestyle
to try to maintain during retirement, when income is typically
lower. Instead of spending surplus funds during the last of
your working years, sock away most, if not all, of it for
retirement. And evaluate your debt. Carry as little consumer
debt as possible into retirement because you'll likely
have less income to pay it off.
Check out where you want to live. If you are thinking
of moving for retirement, try to spend as much time as possible
there, in all types of weather conditions, before you actually
move. Rent before you buy home.
Practice retirement. In addition to checking out new
living locations, try out other aspects of your envisioned
lifestyle before actually retiring: hobbies, travel, time
with your spouse (spend a week's vacation just at home
together with no plans). Live on your retirement budget for
a couple of months!
Check your health insurance. Retiring before Medicare
kicks in at age 65 may leave you without health care coverage.
Have in place coverage when you retire. This may be a continuation
of your employer's group plan under COBRA (you pay all
of the costs) or perhaps a short-term major medical policy.
Also consider a Medigap policy when you reach Medicare age.
Consider long-term care insurance. Most couples nearing
retirement should strongly consider buying a long-term care
insurance policy (better yet, buy it in your fifties). The
federal government provides only limited free long-term care
under Medicare and you'll must be impoverished to qualify
for nursing home care under Medicaid. A private policy will
typically provide far better options.
Securities offered through Cadaret Grant & Co., Inc. Member NASD/SIPC, PPG and CG are separate entities. Securities and/or insurance products not insured by FDIC/NCUA or any government agency. May lose value. Not a deposit of or guaranteed by any bank, credit union or any affiliates. Licensed in AZ, CA, CO, CT, GA, ID, MA, ME, NC, NH, NJ, NY, PA, VA, VT and WY.
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