|Identify goals and objectives to prepare your finances for retirement.|
If you will be retiring within the next few years, you can consider yourself a pre-retiree, and now is the time to start preparing your finances for transition.
Here are some recommended New Year’s resolutions pre-retirees should make in 2019 to get ready for a happy retirement:
1. Identify goals and objectives. At this point in your life, you need more than a vague notion of what retirement will look like before you actually get there. You want to start now thinking about retirement expenses, including the cost of your interests, hobbies and activities (such as traveling) so you will know what you can afford. Â
2. Pay off debt. If you’ve been talking about getting out of debt, itâ€™s time now to get serious. In most cases, a mortgage, credit card balances or even student loans can cripple your retirement budget.
Pay off bills now while you are still earning money. Doing so will leave you in a better place financially, rather than waiting to draw down on your retirement savings to pay off the debt. Â
3.Â Create a retirement income plan. Having enough money in retirement savings is a good foundation for having a successful and happy retirement. A key question to ask is â€śHow are my retirement assets â€“ 401Ks, pensions and savings â€“ going to create lifetime income?â€ť The answer to this question lies in working with a financial professional that specializes in designing a comprehensive written retirement income plan.
Taxes are an important consideration. Financial professionals can design a customized written retirement income plan that includes minimizing tax liability while showing the income you need to maintain your retirement lifestyle.
Without a written plan, you run the risk that all aspects of retirement have not been considered.
4. Understand your Social Security strategy. A good retirement plan should include figuring out the right time to claim Social Security. Although Social Security benefits can be claimed as early as age 62, you can lose up to one-third of your monthly benefit amount by not waiting until your full retirement age.
Because people are living longer, it may make sense to delay taking Social Security, depending on your marital status, personal needs and other income sources. You gain 8 percent for every year after your full retirement age that you delay taking Social Security. Wise use of this strategy is very important to your income plan and itâ€™s more than a notion to understand what is best, as each personâ€™s circumstance is different. Â
5. Review life insurance coverage. For many retirees, life insurance needs change as they longer have a need to provide for a family as they did earlier in life. However, if you carry a mortgage, have other debts or are raising grandchildren, you will need to evaluate your insurance coverage. Â
6. Understand your health insurance options. If you’re retiring before age 65, having a health plan to cover the cost of health insurance important.
Medicare doesnâ€™t begin until age 65, so early retirees will need to include in their income plan the cost of having private individual health insurance. COBRA coverage allows some retirees to continue buying their workplace health coverage; however, the cost is usually exorbitant. Â
7. Work with a financial advisor. Reviewing your financial risk profile is a key task for pre-retirees to do in 2019.Â As experts in retirement income planning, financial professionals can help identify gaps in your retirement plan and help you prepare for common risks in retirement that you may not have thought about. Most important is protecting hard-earned retirement savings from the possibility of a market downturn.
Joyce Palmer is CEO and managing partner at JP Financial Group LLC in Charlotte. Telephone: (704) 543-6269.