Congratulations on nearing retirement! Here are some smart financial moves to consider making before embarking on that next big step in your life.
Review your retirement accounts: Take stock of your retirement accounts, including 401(k), IRA, and any other investments you have. Make sure your investments are appropriately allocated and consider consolidating accounts to simplify management later on.
Evaluate your debt: If you have high-interest debt, such as credit card debt or personal loans, it’s wise to pay these off before retiring. High-interest debt can eat into your retirement savings and paying it off can give you greater peace of mind and more financial flexibility.
Consider downsizing: If you have a large home, consider downsizing which will reduce your housing expenses and free up cash for other expenses like paying off those high interest credit cards. If you have considerable equity in your home, then those funds might be used to boost your retirement savings.
Maximize Social Security benefits: Delaying Social Security benefits until you reach full retirement age or later could increase your benefits by as much as 8% per year but is that the best strategy? Everyone’s circumstances are different so make sure you employ a strategy that is best suited for your situation.
If you expect to live a long time and have sufficient retirement savings or other sources of income, it may be beneficial to delay taking Social Security benefits as long as possible to maximize your monthly benefit amount. However, if you need the income to cover your living expenses, it may be more advantageous to start taking benefits earlier, even if that means a reduced benefit amount.
Plan for healthcare costs: Healthcare expenses can be significant in retirement, so make sure you have a plan in place to cover them. Explore purchasing supplemental Medicare coverage or a long-term care policy.
Create a retirement budget: Create a realistic budget that considers your retirement income and day-to-day living expenses. This will help you stay on track and avoid overspending.
Develop a withdrawal strategy: Decide how you will withdraw money from your retirement accounts and other investments. This will help you avoid taxes and penalties and ensure that you have enough money to support your retirement lifestyle. Missing a Required Minimum Distributions (RMDs) could end up subjecting you to a penalty of up to 50% of the amount that should have been distributed.
These are just a few of the smart financial moves you can make before retiring. One of the smartest financial moves is to consult with a financial advisor can help you create a personalized plan that takes into account your unique financial situation and retirement goals.