If you’re a pre-retiree, that means retirement is well within your view. You’re probably in your mid-50s or later, and you have a sense of the resources and assets that will be available to you once you leave the workforce. That puts you in a prime position to truly define your retirement and take measures to ensure that you realize all of your retirement goals. To that end, consider the following five retirement planning tips that can help you cross the finish line in a state of comfort and financial security.
Take Inventory of Your Finances
Your pre-retirement years are the ideal time to take inventory of your financial affairs so you can determine your next moves. Begin by examining your liquid and illiquid assets, such as your bank accounts, retirement accounts, and investments. By recognizing how each resource is performing, you can either confirm you’re on the right trajectory or take corrective actions to make sure you accumulate enough wealth to live out the kind of retirement you want.
Take Stock of Your Health
As the AARP reports, medical care is likely to be one of your biggest expenses after you retire, but the amount of your expenditure will depend on the state of your health. You can reasonably expect to pay less for your medical care if you’re in good health and mindfully work to maintain it, but the costs may rise nevertheless as you grow older and experience an increasing number of age-related health conditions.
What you can do to prepare for these expenses is to take stock of your current health and pursue preventive care. In addition to your annual physical, make a point of addressing seemingly small matters, too, like teeth cleaning, which can contribute to your cardiovascular and cognitive health. Doctor’s appointments aside, you can also take proactive measures at home, such as eating right, exercising, and planning care contingencies with your family. By doing so, you may both improve your overall health and have a potential support system in place that can reduce your future healthcare costs.
Maximize Your Future Returns
Those who aren’t keen on a semi-retirement will want to do what you can now to maximize your returns later. If you have a 401(k), for example, you may want to max out your contributions, which means contributing as much as you’re legally allowed per year. The regular contribution amount increases regularly because of cost-of-living adjustments, so you can contribute more and more as time goes on. That allows you to take advantage of the compound interest and accelerate the growth of your retirement savings, thereby giving you a larger nest egg to fund your retirement.
Another option is to open an individual retirement account (IRA). An IRA can work to your benefit in place of or in addition to a 401(k), as it grows in the same manner — through contributions and appreciation. The two primary types of IRAs you can choose from are traditional IRAs and Roth IRAs. The main difference between them is that traditional IRAs are tax-deductible but with taxed withdrawals, whereas Roth IRAs are not tax-deductible with tax-free withdrawals. To learn more about IRA options, consult resources like the Internal Revenue Service.
Decide the Best Time to Start Receiving Social Security Benefits
The age at which you start receiving Social Security benefits determines how much you’ll receive every month. Per the Social Security Administration, you can begin as early as 62 and as late as 70, with the benefit amount increasing the longer you delay. If you’ve taken inventory of your finances, you should have a good idea of how long you can do without a Social Security check. Use that knowledge to decide the best time to start receiving your benefits so you can maximize your monthly amount.
Secure a New Source of Guaranteed Income
A useful supplement to traditional retirement income streams is a fixed annuity, a type of insurance contract under which you pay a contribution that grows tax-deferred at a guaranteed interest rate for a specified term. At the end of the term, you have the option to annuitize the contract or convert it into a series of payments that can last for the rest of your life. The money you receive from the annuity pads your 401(k), IRA, and Social Security checks, preventing you from outliving your savings.
Ideally, following the above tips puts you in a better position to retire on your terms. Before committing to any measures, however, make sure to speak with a financial adviser, as they can provide tailored guidance that meets your specific needs and concerns.
Ismail is a freelance tech writer with a passion for lifestyle, gadgets, apps, and cars. My writings carry a huge amount of different social aspects that may help to improve your lifestyle. Find him by email.