Steps to Take If You Are Retiring in the Next Year

I had the opportunity to explore this question. I thought I would publish a piece on it as well.

Steps to Take If You Are Retiring in the Next Year

I had the opportunity to explore this question. I thought I would publish a piece on it as well.

1) Develop a spending plan for retirement

Your retirement spending plan should be different than your normal spending plan. For example, there will probably be more travel related expenses. If you have grandchildren, chances are you will see them more and spend more money on them than you normally would. Another example is that you won't really have the need to save. Once you figure out the spending game plan, you have a ball park number that you know you will need to fund each month from retirement benefits.

2) Determine if it makes sense to pay off debts

If you are not already out of debt, you might consider dipping into a retirement account and paying off a mortgage. Before you do that, sit down with a Financial Advisor and see if it makes sense. The Advisor will calculate the effect on your investments and your cash flow figuring out which one is more advantageous. You also have to figure out the best way to accomplish being debt free from a tax standpoint. If you had a $50,000 mortgage and were going to pay it off, you might want to pay 1/2 one year and the other 1/2 the next year.

3) If you haven't done so, build a big cash fund. It is an advantage to have a lot of cash at retirement. Being a year out, you can really focus on creating a large emergency account.

4) If you need to replace a car, consider financing it as long as the rates are low and it doesn't put a strain on cash flow

5) Take inventory of your assets and determine which accounts can be combined. For example, IRA's and retirement plans can be combined. One commonly asked question is regarding combining a spouse's retirement plan. You can't combine your retirement plan and your spouses retirement plan. Those have to remain in individual names. The goal is to start getting your investments ready for a single overall strategy.

6) If you are close to your goals or have achieved your goals, consider reducing your risk. When you are that close, it doesn't make sense to take a whole lot of risk. This wouldn't be a time to risk big losses.

7) Start the process of interviewing Financial Advisors. A competent Financial Advisor is crucial in retirement for those who don't want to do it themselves. Take your time. This is as important as any step that you will take.

8) Create a life plan - Retirement is a big change. You start a new season in your life. It is best to create a life plan so that you know what you will be doing with your time. I have had clients go into depression because they just weren't prepared for retirement. It was too drastic of a change. There are plenty of opportunities to get involved in ministry endeavors. Consider your skill sets that you can invest into others and determine where your passion lies.

What you don't want to do - You don't want to look at these steps and determine you are too busy to undertake the process. You will do it when you retire. After all, you will have more time right? The importance of doing this ahead of time is that it gives you the option of correcting something with your finances while you are still working. You might also determine that you need to work just a little longer. Look at it as a runway to your retirement!

Valuable Advice!!!

Good advice! I would also add to #8... You don't necessarily have to retire. If you still enjoy what you are doing and you are able to do the other things you value or want, you probably shouldn't. The planning gives you the freedom to make that decision and it not be made for you.

@JosephC - you are absolutely correct - if you have that luxury and you enjoy what you do, then keep working - especially if you need to do so. The challenge is that can't be Plan A. We never know what life brings.