You've conquered your professional goals, and now it's finally time to settle into some well-deserved downtime, dedicated entirely to you. But before you can plan your retirement party and start making travel plans, you have to make sure all your affairs are in order.
In other words: You're ready to start seriously thinking about retiring in the next few years, but you're unsure if you're financially prepared to do so. You're not alone. A recent study conducted by the Boston College Center for Retirement Research found that 40 percent of working-age Americans have an unrealistic understanding of their progress toward secure retirement.
Don't worry - the retirement party is likely still in your near future. Here's what to know about your funds in terms of retirement financial planning:
Start with the math
Take a hard look at your finances to determine how retirement will affect your daily life. Find out the answers to questions such as:
- How robust are your retirement savings?
- Do you currently have any major debts to pay off?
- How much income will you need in retirement?
- What are the tax implications of receiving this retirement income?
- Which accounts will you draw retirement income from first?
- Is your investment portfolio properly allocated and diversified to your specific needs and risk capacity?
There are several retirement calculators that can help you do this critical math. The Social Security Administration offers a Retirement Estimator and Quick Calculator, which offer benefit estimates based on your personal standing. Other online calculators will help you draft a retirement plan or deduce an appropriate retirement budget.
Consider retirement income
Social Security is only one source of post-retirement income. However, remember that you must be at least 62 years young before you can start receiving these payments. In fact, the longer you wait to retire, the higher your monthly benefits will be, according to the SSA. If you have a pension or spouse who will still be working, you can calculate those payments into your retirement income.
There are also plenty of other avenues to pursue, such as investments in stock or real estate. You may also consider consulting or freelance opportunities to work at a smaller scale after giving up full-time hours.
Don't forget about health insurance
A major perk of working full-time is health care coverage. If you're eligible - meaning you're 65 or older - start looking into the basics of Medicare and supplemental health insurance. If you aren't quite of age for these care benefits, research your coverage options to determine how much health insurance will cost in the meantime.
Think about the retired life
Once you have a better understanding of your current financial standing and how much money you expect to earn in retirement, you can start forming a retirement budget to make astute adjustments now in preparation for later. For many soon-to-be retirees, this is the time to start managing funds with future investments in mind, such as a second home, RV or new car. You may also want to start setting aside money designated for the ways you want to spend your time and money once retired, such as funds for travel, personal trainers or family support.
Reach out for expert advice
Retirement planning can be overwhelming, but you don't have to go at it alone. At Northstar Financial Planning, we focus on working with you during periods of major transition like retirement. More than just managing your financial situation, retirement involves hefty perspective and emotional changes. Our Certified Financial Transitionists® are here to take the stress out of the process, making your retirement planning a productive and exciting experience.
Contact us today for a complimentary "Get Acquainted" meeting. From there, we can help you reach your retirement with confidence in your financial health.