Retirement Ready? How to Prepare Your Finances before the Big Day

Retirement isn’t a stage in life you can just jump into without preparation. It takes decades of preparation to save enough money to afford the life you want, and it also takes time to get your finances ready for the burden of a life without income. Here are four things you should be doing to help prepare your finances for the big day.

Begin Reallocating Your Investments

Estate PlanningThe older you get, the less opportunity you have to recover from losses in the market. That’s why you should move more and more of your assets into low-risk, fixed investments as you get older. That way, you are still able to grow your money, but you are less likely to lose it as you get close to retirement. You might also consider placing a portion of your retirement funds into either an Annuity or some other form of guaranteed income like a pension plan. That way you have guaranteed income no matter how long you live.

Pay Off Debts

No one wants to head into retirement with credit card or auto loan debt hanging over their head. While some might think they can retire while still having to pay on a mortgage, it is probably not a good idea. To ensure a stress-free retirement you should make sure you have absolutely no debt as you head into retirement. After all, if you can’t pay off your mortgage on a full-salary how do you expect to make the payments when your salary is eliminated and you are living on a reduced budget?  In your final years of working, it’s good to focus heavily on savings and debt repayment, while also making sure you don’t continue to create more debt.

Create Your Post-Retirement Budget

You may not be able to spend in the same way during retirement as you did while working. Since your retirement savings have to last an undetermined amount of time, you want to be very careful about how you spend. To begin, create a budget you can use after you retire that limits your spending on non-essentials. It doesn’t have to be a super sparse or limiting budget, if you have a pension or annuity, Social Security or simply investment income just consider how you will match your spending to your income.

Create an Estate Plan

Many seniors become preoccupied with spending (or actually not spending) during retirement either because they are afraid they will outlive their assets, they fear an unexpected illness or because they want to make sure they have something to leave behind for their family. The problem with this is, you could overly limit your personal spending and become uncomfortable when it isn’t really necessary. If you have a good budget and want to provide for loved ones it is important to have a good estate plan in place. Just as to provide for perpetual income you might choose an annuity. If you fear an illness you should have a good long-term care policy and to provide for heirs the easiest method might be an insurance policy.  All these items should be discussed with either your financial planner or your estate planner.

To make things easier for your heirs, you should also have a listing of your property, accounts, other assets and life insurance policies in a system that they can easily access and understand. It will also help you as you’ll have a much better sense of the assets you’re leaving behind, and you may feel more secure knowing your retirement savings are secure. When drawing up an estate plan it is critical that your planner is licensed and experienced in the state that you live in. For instance if you moved from Wisconsin to Florida when you retired and no longer own assets in Wisconsin, you wouldn’t want to have a lawyer versed in estate distribution in Wisconsin. Instead, you would want an estate Lawyer licensed in Florida to advise you on the best way to organize your assets. This means that since laws vary from state to state, once you move you should get a new will drawn up in the state you move to.

With a bit of forethought and planning, you can create a retirement plan that works in your situation and keeps you safe and secure for the remainder of your years.


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