First off, give yourself a pat on the back. After 40+ years of work, you deserve a comfortable retirement life—but the deed’s not done yet. There are still some things you need to take care of and get in order; proper preparation now will enable you to have the retirement life of your dreams.
In this blog, we’re going to talk about some major (and often overlooked) things you need to consider before finally retiring.
Debt, if accumulated and unpaid, is like a ticking time bomb—especially if your income is fixed. The first dollars you lose every month are to credit card dues, loans (auto, student, etc.), and mortgage. Regardless of your budget, these payments must be made.
After you retire, your income will drop, sometimes greatly. Debt repayment prior to retirement is a must.
Whether by transferring your credit card balance to a card that has lower rates or taking on a small/part-time venture, we’d suggest you take care of all debts immediately. Put together a debt payoff plan according to budget, no matter the lifestyle changes that are required, and take care of this problem before it grows any bigger.
You’ll find many resources out there that outline how you can pay off your debts after retirement (like this Telegraph article and this one by Forbes), but they will guide you toward refinancing options and getting “side hustles,” and these aren’t ideal for most retirees. Paying off debt during retirement can seriously affect your quality of life, and the financial shocks aren’t as easy to shake off.
The best part about retirement is, obviously, never worrying about having to go to work again. The paycheck, however, is something you’re going to miss. Therefore, you need to properly estimate your retirement income.
The major sources will include retirement savings plans such as a 401K, IRAs, pension, social security, life settlements, rental properties and other passive sources of income.
While it’s possible to scrape by on social security, you’ll never go back to the standard of life you once had. This social security estimator can help you figure out how much you’ll get once you retire.
We suggest you make a list and a thorough breakdown of how much you’re expected to make in the coming years, as well as the percentage you can take out for sustenance. This will give you a good idea of your budget, and you’ll be better disposed to live your life accordingly as a result.
When Does Social Security Begin for You?
The decision to start collecting social security is an important one—since you can receive higher-value monthly checks if you delay collecting them.
If you start taking them out earlier than 65, you’ll have to contend with greater reductions. Of course, this depends on how badly you need it. We’d suggest you look at alternative means of income—such as rental properties, IRAs, life settlements, etc.—and delay collecting social security for as long as possible.
More about Pre-Retirement Planning and Selling Life Settlements
Pre-retirement planning is an extensive list, and we knew we couldn’t cover them all in one blog—which is why this second part (link to Part 2) covers the rest of it.