There’s no shortage of articles telling us how to prepare for retirement – but until you’re really ready to hear the information it tends to fall on deaf ears. This article we recently found on the Motley Fool website is a good basic case in point: it presents “A 4-Step Checklist for People About to Retire,” and while the list is not really new, it’s a solid and helpful approach for those with a retirement date looming on the horizon. If that’s you, these four steps represent a helpful place to start. But here’s a heads up: there’s a “fifth step” we are convinced every retiree needs to take. Keep reading and we’ll tell you more.
Complete This Retirement Checklist Before You Walk Out the Office Door
“Are you getting ready to leave the working world for good?” asks Motley Fool writer Christy Bieber. “Before you walk out the door for the last time, it’s important to get a few financial priorities completed so you can live out your golden years with the minimum of money worries – and so you can actually enjoy your years of retirement.” Although Bieber lists what she calls “four tasks” to “check off your list” before handing in your notice, her four-step checklist is really a bit more complicated and far-reaching than that. What’s more, while steps one through three are purely financial, the fourth is a bit more wide-ranging, as you’ll see. Let’s look at Bieber’s four-step checklist.
- Pay Off Debt. We agree with this advice wholeheartedly, because debt can cripple a retirement plan. “Wasting money on interest means you’ll have less income to live on or will need to draw your investment balance down too quickly, so ideally you should try to be debt-free before you retire,” Bieber advises. Mortgage debt, student loan debt, and high-interest credit-card debt can bleed you dry and keep you making minimum payments for decades. So, do whatever you can to eliminate debt while you’re working, even if it means working overtime or cutting expenses. “When you’re a carefree senior without debt bills to pay, you’ll be very glad you worked hard to get rid of it,” Bieber writes, and we concur.
- Calculate Your Retirement Income. This sounds basic, but it’s a step many future retirees fail to take. “You need to know how much money you’ll have to live on during retirement so you don’t end up spending too much and going into debt or drawing down your savings too quickly,” says Bieber. Likely income sources include Social Security, an employer-provided pension, investment income from retirement accounts, and other sources such as part-time work, real estate, alimony or inheritance. “The key is to look at all your different sources of money,” says Bieber, “and figure out the maximum you can spend.” This is where a retirement dashboard prepared by a qualified financial planner can prove invaluable.
Your Retirement Checklist Includes a Realistic Budget
- Make a Budget. When you know your projected income, it’s time to create a detailed budget. “When setting your budget,” Motley Fool says, “you should take all of your expenses into account, including fixed expenses for housing as well as expenditures on things like entertainment and travel. And don’t forget to consider healthcare costs.” If your income supports your budget, provided you’re being realistic, that’s good news. “But,” says Bieber, “if you find that you just can’t make the numbers work because your income doesn’t stretch far enough, you’ll have to consider working longer or changing your lifestyle. Don’t retire until you’ve figured out a budget that works with the income available.”
- Plan What to Do with Your Time. This step, also frequently overlooked, is simple but profound: you need to figure out how you’ll spend your days in retirement. “Many people rely on work to provide structure and social connections,” Bieber warns. “If you don’t have a plan for what to do during retirement, you could find yourself at loose ends, which could lead to depression and other health issues. The good news is, this part of retirement planning should be fun, especially if you’ve found plenty of room in your budget to do the things you love.”
Working through these steps will help you decide when it’s time to retire. “You don’t want to leave work only to find you have too little money to live on or that your debt is eating up your entire Social Security check,” says the article. However, “If you go through each of these steps, you can ensure you’re really ready to leave work and then hand in your notice without any worries.” As Rajiv Nagaich puts it, “You shouldn’t work a day longer than you have to!”
Besides the Retirement Checklist, You Need a LifePlan
But as we said above, there’s a “Step Five” that we at AgingOptions urge people to take: attend a free LifePlanning Seminar. It’s our answer to the puzzle of retirement preparation. Rajiv Nagaich of AgingOptions says we can’t allow the complexities of retirement planning to paralyze us. “No matter how old you are or what your circumstances,” he emphasizes, “a solid retirement plan called a LifePlan is the answer. Even if you worry that you aren’t prepared or don’t have enough, a LifePlan can show you the way forward toward a better retirement than you thought possible.” Only a LifePlan from AgingOptions weaves together, not just your financial strategy, but all the essential elements that matter most, including legal, housing, health and family issues. With a LifePlan prepared, fear of the future can be replaced with confidence and a sense of optimism about the new chapter called “retirement.”
If you’re ready to find out more, we invite you to join Rajiv at an upcoming LifePlanning Seminar – a great way to begin the retirement journey. To see a calendar of these popular free events, visit our Live Events page and register for the location that works for you. It will be our pleasure to greet you and to share with you and your loved ones the power of an AgingOptions LifePlan. Age on!
(originally reported at www.fool.com)