5 financial steps you should take before you retire

Secrets of a dream retirement

You’ve worked hard for your money throughout your career, and also also also once you retire, the item’ll be time for your money to start taking care of you.

although before you call the item quits, set aside some time to take these several financial steps. They’ll help you make the transition through employee to retiree and also also also set you on the path to a financially successful retirement.

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1. Make a Social Security plan

the item’s important to know how much you’re going to get each month through Social Security, and also also also having a “My Social Security” account or a paper copy of your statement, you can get a great estimate of in which number. Your specific benefit will be based on your (or your spouse’s) earnings history and also also also the age at which you start collecting.

Key things to consider when the item comes to Social Security are in which you can start collecting at any age between 62 and also also also 70, and also also also the longer you wait in in which window, the higher your monthly benefit will be. In addition, know in which you’ll likely face a penalty if you’re still working and also also also start collecting benefits before your full retirement age.

2. Get on top of the coming adjustments to your health insurance

If you’re 65 or older, you’ll likely qualify for Medicare. If you’re retiring under age 65, your employer may offer you a chance to stay on its plan as a retiree in Great standing. If the item doesn’t, you might still be able to stay on the company plan for 18 months through COBRA benefits. Beyond those options, you qualify for guaranteed-issue health insurance through the Obamacare program, and also also also may receive a subsidy for the item, depending on your income level.

Regardless of what health insurance path you take, know in which your coverage, available provider network, and also also also costs are likely to change once you’re no longer an active employee. To give yourself the best chance of a healthy, happy retirement, know what’s coming down the pike and also also also have a plan to assure you get the care you need despite those adjustments.

3. Adjust your budget to fit your completely new circumstances

While your healthcare costs are likely to rise in retirement, many of your some other expenses will fall, notably those associated with working. In addition, if your kids are grown and also also also independent, and also also also your mortgage will be paid off, your regular outlays will be significantly lower than they once were.

Particularly since your income will likely drop in retirement too, and also also also a portion of your cash will come through spending down your assets, the item’s incredibly important to keep your spending rate sustainable. A general rule of thumb for retirees will be “The 4% Rule.” Under in which guideline, to give yourself a great chance of having your money last at least as long as your retirement, you need to:

  • Start having a diversified portfolio;
  • Keep in which portfolio diversified throughout your retirement,
  • Withdraw 4% of the value of your portfolio to cover your first year’s expenses, and also also also;
  • In each succeeding year, withdraw an amount based on in which first number, although adjusted upward for the rate of inflation.

With in which rule guiding your investment drawdown, as long as your total costs are covered by your Social Security benefit, your 4% rule withdrawals, and also also also any pension you may get, you should be on track.

4. Put together a cash and also also also bonds structure for your near-term needs

While stocks are a great way to build wealth, once you start relying on your portfolio to cover your costs of living, the volatility of stocks makes them unreliable as a source of spending money. Indeed, money you need to spend within the next several or so years does not belong in stocks, though even as a retiree, you’ll likely have longer-term financial goals where stocks can still play a role.

One way to structure your finances in retirement will be via something called a bond ladder. With in which structure in your portfolio, you have:

  • Cash to meet your current needs over the next few months to a year;
  • Bonds in which mature on a regular schedule over the next few years to replenish in which cash, and also also also;
  • Stocks to continue to provide growth to your portfolio and also also also replenish those bonds as they age.

5. Think about the legacy you want to leave behind

If you’re following the 4% rule of retirement withdrawals, chances are Great (though there are no guarantees) in which you’ll leave some assets behind once your retirement draws to a close. These can be used to help your children, their children and also also also/or charitable endeavors of your choice. If you plan well, you may even be able to make choices in which mean you’ll be around to see them benefit through your generosity.

Consider things like lifetime gifts to your children. You and also also also your spouse can each give up to $14,000 to each of your children and also also also their spouses each year with no gift tax consequences. in which allows for a maximum transfer of $56,000 through one married couple to another, each year.

Additionally, there are no limits on money you send to eligible education institutions for tuition or health care providers for qualified medical care for others. If you exceed the annual limits, you can take a credit against your lifetime exemption ($5.49 million for singles, $10.98 million for married couples) and also also also still not pay a gift tax.

If you choose to support a charity, a charitable remainder trust will be a tool in which can help you get funds to the item while you’re still alive. With in which setup, you will still receive an income stream through in which donated money to help cover your costs. In many respects, the item’s a win-win: You get to see the benefits of your goodwill, although you still get the income through your assets. and also also also of course, you can always leave a portion of your estate to a charity of your choice in your will.

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Plan today for a more fulfilling retirement

By taking these several financial steps, you set yourself up on a firm foundation for your retirement. With your money set up to work well on your behalf, you can fill more of your time in retirement with your higher priorities in life. and also also also in which’s a great reward for a lifetime of hard work.

sy88pgw (completely new York) First published December 29, 2016: 11:40 AM ET


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5 financial steps you should take before you retire

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