You've spent a lifetime working hard to create a comfortable life and an enjoyable retirement. As you approach or enter retirement, there's no better time than the present to make sure your affairs are in order. Your retirement should be as fabulous, extraordinary, or exceptional as you want it to be. However, if you fail to plan, you're essentially planning to fail. Here are a few quick tips you can add to your retirement checklist to make sure you're on track for the success you deserve.
Start Your Retirement Checklist by Taking Inventory
How can you know where you're going if you don't know where you stand? Whether you rent a house or own 10 different properties, everyone has an estate. One of the first steps on your retirement checklist should be to take an inventory so you can determine exactly where you stand financially. Here's how:
There are several different worksheets and online tools available to help you accurately assess your asset and debt inventory.
How Can You Minimize Debt?
In a perfect world, you'll slash all or most of your debt before you enter retirement. Even if you don't eliminate all debt, it's important to reduce it. When you enter retirement, your income is likely to decrease.
If you have any large payments, it will take up a more dominant share of your income. As you near retirement, make sure to pay special attention to the debt column of your inventory.
There are a few different schools of thought regarding how to eliminate debt prior to entering retirement:
In most instances, the debt with the highest interest rate will be credit cards. Mortgages are usually a good debt you can save for last because they tend to have lower interest rates.
One strategy to pay down the highest interest debt is to take a home equity loan to consolidate these accounts. Speak to a financial advisor to see if this makes sense for you. Regardless of the strategy you choose, it's critical to stick to it!
How Much Do You Need to Retire?
How much do you need to retire? The Bureau of Labor Statistics shows the average 55-year-old American spends around $49,279 a year. However, most experts suggest you should have anywhere from $1 million to $1.5 million in savings to support a 30 year retirement. In reality, the amount you need to retire will be based on several factors, such as:
It's always a good idea to work with a financial advisor to help you plan and understand the impact of different streams of income. For instance, perhaps you will expect income from:
And in the process of calculating income, don't forget about taxes! This is a very big consideration that is often overlooked when you don't work with an advisor. At the end of the day, it's best to work with an experienced financial advisor to create a plan, so you can confidently embrace whatever retirement has to offer.
Healthcare Must be on Your Retirement Checklist
The biggest expense you'll face in retirement is healthcare! The Bureau of Labor Statistics Consumer Expenditure Survey suggests healthcare accounts for up to a whopping 15% of retirement spending. By now, you may need to make an adjustment to the previous step...and you should!
Make sure you consider where you'll get healthcare coverage. If you retire at or after 65, you can primarily rely on Medicare. However, if you retire early, things get trickier and more expensive. In the event you don't have healthcare through your previous employer or through the employer of your spouse, you'll need to purchase private insurance.
Whatever and however you decide to address this common problem, make sure your insurance doesn't lapse when you’ll need it the most. Pay special attention to the conditions of your coverage, the terms, deductibles, and what you expect to pay in premiums, out-of-pocket costs and co-pays. And remember: Medicare and private health insurance do NOT cover the costs of long-term health care needs. Consider Long-term care insurance for this purpose.
Don't Forget to Create an Estate Plan
To put it simply, your estate plan involves you deciding how you want your assets to be distributed after you pass away. Estate planning can be very complicated, so it's best to work with the experienced, award-winning team at Cona Elder Law to create a comprehensive plan. We'll help you confidently answer the following questions:
- Who will care for any minor children you may have?
- Who will inherit your assets and properties?
- How much will each person inherit?
- Should your heirs inherit the assets outright or in trust?
- Who will manage your financial affairs in the event you are no longer able to?
- Who will be responsible for distributing your assets/ who will be the estate administrator?
Once you create an estate plan and can confidently check all of the boxes, you'll be better prepared to enjoy every day of your retirement — knowing the future is more secure and your wishes are clearly communicated and documented.
Contact Cona Elder Law today for assistance finalizing your retirement checklist and creating an estate plan.