The Top 4 Things You Should Do as You Approach Retirement
Many of us spend our final few years at work dreaming of the day we can finally retire, looking forward to our wide-open schedules and seemingly endless possibilities.
However, when approaching this huge life transition, several things are necessary to do to prepare and ensure we’re able to make the most out of our retirement.
With this in mind, here are the four things you should do when approaching retirement to ensure you’re fully prepared and make the transition as smooth as possible.
1. Plan how you want to spend your time.
Though many spend their years at work looking forward to the day when they no longer have to get up early and spend their waking hours at their place of employment, a lot of people don’t realise that having too much free time isn’t necessarily a good thing.
Therefore, in addition to deciding if you want to make any significant life changes – such as moving house, moving abroad or going on a big trip – you might want to start thinking about how you’re going to spend the majority of your free time.
After all, your retirement could last up to a third of your life – and that’s a long time to spend pottering around and watching TV.
You might decide to fill your time with volunteering, take on part-time employment – such as teaching or consulting – or fulfilling a lifelong ambition, such as writing a book.
It doesn’t matter what you decide to fill your time with as long as you have a plan for how you want to fill it – this will make your transition to retirement much easier, as you’re less likely to feel like you’ve lost your purpose like many have when first exiting employment.
2. Take stock of your finances.
As you approach retirement, one of the most important things to ascertain is whether you’ll have enough money to live the kind of life you envision in your golden years.
Figuring this out starts with getting a comprehensive view of your financial situation.
This includes sizing how much you can expect from your pensions, including any lost pensions if you’ve had multiple jobs. How much you have in savings or investments – taking into account the likely returns, any tax costs and any extra income you have, such as money earned from renting out property.
Bear in mind that while many expect retirees to live on about 70% of their previous income each year, the truth is that often we spend just as much as we did while employed.
Bearing that in mind, can your finances fund the lifestyle you want?
If not, you need to work out how to adapt, such as taking on a part-time job, or even considering downsizing to give yourself extra cash – which you can choose to save or invest – or simply budgeting and adapting to living on less.
If you still have a few years before you plan to retire, this is the time to max out your retirement savings accounts and invest more (though probably in low-risk assets such as bonds rather than volatile classes such as stocks).
3. Eliminate debt.
As you approach retirement, one of your top priorities should be eliminating debt, starting with high-interest debt such as credit card debt, to gradually paying off the mortgage on your property.
You should eliminate debt as much as possible while you still have a monthly income to enter retirement without having to factor in the monthly payments required to pay off your debt.
Instead, you can spend your savings making the most out of your retirement. Plus, the sooner you pay off debt, the less you end up paying in the long run – so there’s less spent and more money to play with overall.
4. Estate planning/creating a will.
Though planning what happens after your death is an unpleasant task for everyone, it’s vital as you enter your later years to protect the people around you and to ensure that your wishes are adhered to.
As such, creating a will is essential to designate your heirs, leave legacies to certain people (beneficiaries), choose someone to ensure your wishes are carried out properly (the executor) and express any wishes relating to your funeral.
Moreover, estate planning is a crucial step in reducing the tax bill assigned to your beneficiaries so that, when you pass, they aren’t launched into a tricky financial situation.
So, if you’re nearing retirement, be sure to make comprehensive financial preparations, consider how you will fill your time and make a plan to protect your loved ones after you’re gone.
