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5 Critical Things to Do Before You Retire

As you get older and reach your golden years, there are several things you need to get in order before retirement. You likely met with a financial planner many years ago who advised you to begin saving and investing to build up a financial cushion to carry you through your later years. But there’s a difference between planning for retirement and making preparations for retirement. Now that retirement is just around the corner, it’s time to make some decisions and begin making changes to your lifestyle. Here are five things to do before taking the plunge into retirement.

Take Care of Your Housing Needs

Many newly retired seniors realize that they are living in a house that far exceeds their needs and requires attention that they are not willing or able to give. If you plan to downsize to a smaller home or apartment, it’s best to do that before you retire, while you still have an income. This is important if you need to apply for a mortgage, but your income and credit will also impact your renting options. However, if your post retirement income doesn’t support that mortgage you will be in trouble. Downsizing to a smaller (and cheaper) house should hopefully allow you to be mortgage-free thus drastically reducing your cost of living. At this point in your life with limited income you should not be taking on new debt unless it lowers your monthly expenses. Making the move while you’re still employed will allow you greater flexibility and more housing choices. This is also a good time to reduce clutter and simplify things so that you don’t have as many things to maintain. Remember everything you own also owns you, in that you have to take care of it and find a place to store it.

Lower Your Investment Risks

In decades past, your investment portfolio was able to carry riskier stocks and funds because you still had plenty of time before retirement to ride out inevitable ups and downs associated with those investments. But now that retirement is upon you, you need to protect that capital. Work with your financial advisor to shift away from volatile stocks into more conservative options like index funds and mutual funds, or better yet—into savings and money market accounts. Stability is everything at this point and should be your highest priority when rearranging your portfolio.

Decide When to Begin Collecting Social Security

You become eligible to collect Social Security payments in your 60s, but that doesn’t necessarily mean you need to cash out as soon as possible. Many seniors today are living well into their 90s, and depending on your expected income levels during retirement, you might be better off holding off for a few more years before activating those payments. The longer you hold out before collecting, the larger the monthly payments will be.

Create or Update Your Will

Many families are torn apart when an elderly member becomes unable to make financial decisions—either due to death or disability. Make sure that you have a will prepared for your family so that they are not left to make financial decisions that were not in line with your priorities. When preparing a Will  probate lawyer Leon J Teichner & Associates, P.C. reminds us that “The probate process is also essential in cases where the deceased left assets that are valued at over $100,000. Some assets are not included in calculating this total, such as IRA funds, life insurance payouts, and remaining 401(k) balances… any assets that are owned jointly by the deceased and another person, are not eligible for probate.” In other words, in order to avoid probate which can tie up assets for months (and even years if the Will is contested) the best thing to do is to keep your estate below $100,000. You can do this through Annuities (with a life insurance clause aka. a balance transfer clause), or through Life Insurance, or keeping funds in retirement accounts with a beneficiary listed, or by jointly holding assets with the intended recipient.

Prepare for Medical Contingencies

As with making financial decisions after your passing, you will also want to make sure that your family knows in advance what your desires are in case of specific health problems. Do you want to be kept on life support if you end up in a coma—and for how long? What will happen if you have a fall and are unable to care for your own daily needs? Will you get in-home care or be moved into a facility? Which facility or in-home care service do you wish to use? These are questions that should be considered now rather than in the heat of the moment. So just like creating a Will you should also create a “Living Will” or “Advance Medical Directive” ensures that your wishes are specified clearly and in writing so that there can be no question if you become incapable of making your wishes known. In addition, you should look into a “Long-Term Care Policy” which pays out if you become incapacitated and need to get either in-home nursing or go to a Nursing Home.

Retiring is a major life event, but there are a lot of things you can do to make transitioning to a new lifestyle go smoothly. Downgrading your possessions and housing are a good start, followed by shifting your investments, securing your income, making medical decisions in advance and planning your will. You’ve spent years planning for this, so now is the time to put those plans into motion. And the sooner you start, the better.