Retirement signifies a major life milestone, marking the shift from employment to a more flexible schedule. If you’re considering retiring in 2024, it’s prudent to begin by charting a course. This often involves strategizing about your future income sources, given that you’ll no longer be receiving a regular salary.
Review Your Financial Situation
Prior to making any decisions regarding retirement, it’s essential to assess your present financial standing. Conduct a thorough evaluation of your savings, investments, and retirement accounts to ascertain whether you have sufficient funds to sustain yourself and your household in the foreseeable future. Consider scheduling a meeting with a financial advisor or having a discussion with your spouse to determine if the timing is financially favorable for retirement.
While you may qualify for Social Security benefits, it’s important to recognize that the amount you receive may not fully cover all your expenses. Additionally, bear in mind that retirement could span several decades, necessitating careful financial planning for the long term.
Crafting a Retirement Budget
Michael Hoyle, a certified financial planner and private wealth advisor at Conrad Siegel in Harrisburg, Pennsylvania, emphasizes the importance of reviewing your current spending habits to gauge what your retirement budget might entail. Start by accounting for essential living expenses like housing, groceries, utilities, transportation, and insurance. Consider how your spending patterns may shift in retirement, factoring in potential expenses for leisure activities such as travel or memberships to clubs.
Identify areas where you could potentially reduce expenses, such as downsizing from two vehicles to one or cutting back on work-related attire purchases. By carefully assessing your current spending and anticipating future needs, you can create a retirement budget that aligns with your financial goals and lifestyle preferences.
Optimize Your Retirement Savings
Before making any retirement decisions, it’s crucial to assess your current financial situation. Evaluate your savings, investments, and retirement accounts to determine if you have enough funds to support yourself and your household in the years to come. You might set up an appointment with a financial advisor or sit down with your spouse to decide if it’s a good time financially to retire. While you may be eligible for Social Security benefits, the amount you receive may not be enough to cover all your expenses. Also, take into account that your retirement could last for several decades.
Pay Off Debt if Possible
See if you can pay off debts, including mortgages, credit card debt and auto loans, before retiring. Doing so will free up your financial obligations during retirement. You won’t have to worry about paying off balances or sending in a monthly payment. If you can’t get rid of all debt, set up a plan to pay it off as soon as possible.
Explore Social Security Options
Determine your full retirement age, which is typically between 66 and 67. If you apply for Social Security benefits when you reach your full retirement age, you’ll get your full benefit amount. You can begin receiving Social Security benefits as early as age 62, but the check you receive will be reduced. If you delay benefits past your full retirement age, you’ll get an increased monthly payment. You can apply for retirement benefits up to four months before you want to start receiving benefits.
“It’s important to determine when you want to start claiming Social Security benefits,” said John Bergquist, certified financial fiduciary and president of Elysium Financial in South Jordan, Utah, in an email. “You may also want to calculate how delaying can impact your monthly payouts.” If you don’t need the funds right away, or plan to pick up work in retirement, you might decide to wait to apply.
Prepare for Health Care
You’ll be eligible for Medicare at age 65 and must go through the enrollment process. You can sign up for Medicare three months before turning 65. If you’re not yet 65, you’ll want to look into other options for health care, such as getting coverage through a spouse’s plan. “If you have a health savings account, you might want to consider maximizing your contributions,” Bergquist said. This could boost the funds you have available for later health needs.
Manage Your Investments
Set aside some time to review how your investments are allocated. “How much exposure do you have to cash, bonds and stocks?” Hoyle said. Consider your risk tolerance level and make adjustments to align with what you’re comfortable with. You’ll want to review your portfolio regularly during retirement.
Also, set up a way to access funds. “Develop a tax-efficient distribution strategy for IRA and qualified assets to minimize tax implications,” said Stephen Roth, a certified financial planner and founder of Limestone Financial Group in Newark, New Jersey, in an email. When you take funds from an IRA or 401(k), you’ll have to pay taxes on the amount. If you’re in a lower tax bracket than during your working years, you could pay less in taxes. Or you might decide to take out a certain amount every year to remain in a lower tax bracket.
Decide on a Location
Downsizing could lower the costs you have for managing a home. If you sell your current place, you can buy another home with the proceeds. Simplifying your living arrangement could also mean less yardwork and fewer maintenance costs.
Look for communities with other retirees where you could make new connections. Or you could opt to move closer to family members. If you’re in an area where the cost of living is high, you might consider a state with cheaper housing and lower taxes.
Plan Out Your Activities
Make sure you have some social engagement every week. “Shift the perspective of retirement from an expense to a period of reflection and enjoyment,” Roth said. You could try out new hobbies or volunteer in your community. You might meet regularly with your neighbors or see places you didn’t have time to visit before. Staying active could help improve your overall well-being in retirement.
