Think ahead a few years or even a decade or two, perhaps. You will be 60, 65, 70, or maybe older. Company pensions will be a thing of the past and 401(k) plans will have not fulfilled their promise as savings vehicles to support you through a comfortable retirement. Will you be ready?
Here are seven things you can do now to ensure you will have what you need when you decide to stop working.
1. Put some thought into it.
Funny thing about that. Most of us never think about what we are going to do when we retire until we are just about to pull the trigger. If you think expenses are going to go down, you might be very wrong. What are you going to do with the 50 to 60 hours (or more) per week that are going to pop up when you no longer have to commute to a job?
Unless you have a really comfortable rocking chair or a time consuming and interesting hobby, leisure time expense is likely to rocket. If you have no idea what you are going to do with your time, you have no idea what it is going to cost.
2. Decide where to live.
Do you want to keep your current home? Too much snow and cold? Kids and grandkids too far away? Are you in an area where there will be other retirees around to share activities and experiences? Do you still have a mortgage? Is the mortgage higher than the home's value? If you sell, what will be the financial impact?
The time to think these issues through is well in advance of retirement. You can take steps now, when you have the cash flow, to ensure you will not be saddled with mortgage debt when you retire. Consider shortening your mortgage term from 30-year to 15-year. Think about buying a one-level second home in a desirable locale that you can rent out or use occasionally and then move into when your job does not anchor you to your current area.
3. Plan for enough income.
While Social Security and 401(k) plans will provide cash flow and you may even be lucky enough to have a pension of some kind, you will most likely need further sources of income to make retirement comfortable and active. While long-term savings and careful investment might provide the best outcome, any savings for any period of time is better than none.
As you plan your income needs, think about longevity. They say the 50s are a deadly decade, but if you reach retirement age, you should plan to live into your 90s.
4. Care for your health.
There are two components to healthy retirement. One is having the best health care program you can afford -- Medicare plus a good supplement. The other is "caring" for your health. Modest but consistent exercise, a good diet, active engagement with other people and paying attention to changes in body and attitude can be an easy and successful way to enjoy retirement, including staying active a lot longer than you might think.
I know of one 102-year-old who just had his driver's license renewed. Unfortunately, I also know of many cases where hitting the rocking chair and not doing much else might have been linked to early death or early onset of serious health problems.
5. Prepare the family.
Not only your spouse, but your children. A surprise announcement that you are retiring and moving a thousand miles away may not be the best way to go. In addition, be sure that children are aware of how you have planned for your estate to be distributed at your death. It is of course a question of "when," not "if."
6. Prepare final documents.
You should have wills, a trust (if you have substantial assets), a living will with power of attorney, medical directive documents (do you want extreme measures taken?), an informal letter that informs heirs or an executor where your assets are located and, if not specified in your will, direction as to how you would like your personal effects distributed.
7. Make a plan.
Stealing a line, if you don't have a plan or direction, you can't get there from here. Sit down and have conversations with spouse and/or family. Give serious thought to where you want to live and the services that you might need as you age. Are they available where you want to go? Tough question: Are you as welcome as you might think where you want to go? If children are scattered, it might be easier to discuss with all and get consensus, if possible. The final decision, though, is yours.
Tie your assets and income stream into the cost of living where you want to go. Also realize that if you are moving to where one or more of your children live they already have an active life, and be sure that you are not going to mix in in such a way that it becomes interference.
Retirement is like anything else in life. The more you put into it, specifically the planning for it, the more you will likely get out of it. Take the time now to create the resources and opportunities that will let you have a happy, active and successful retirement.
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