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Preparing for retirement should ideally begin well in advance, specifically, around 10 years prior to your planned retirement date. Here are some key steps to take during this time:
- Assess your retirement goals: Determine your desired lifestyle and financial needs during retirement. Consider factors such as your anticipated expenses, healthcare costs, travel plans, and any other personal goals you have for your retirement years. We, like many financial planners, have software to help plan out these cost and plans.
- Calculate your retirement savings target: Use retirement calculators or consult with a financial advisor to estimate the amount of savings you'll need to fund your retirement goals. Consider factors like inflation, investment returns, and potential sources of retirement income (e.g., pensions, Social Security).
- Evaluate and adjust your investment portfolio: Review your investment portfolio to ensure it aligns with your retirement timeline and risk tolerance. Consider gradually shifting towards a more conservative asset allocation to reduce exposure to market volatility. Diversify your investments to balance risk and potential returns.
- Maximize retirement contributions: Take full advantage of retirement savings vehicles such as 401(k) plans, Individual Retirement Accounts (IRAs), or other employer-sponsored plans. Maximize your contributions to these accounts, taking advantage of any employer matches, tax advantages, and catch-up contributions if you're 50 or older.
- Pay down debt: Aim to reduce or eliminate high-interest debts, such as credit card balances or loans, before entering retirement. Reducing debt can free up more funds for retirement savings and lower your monthly expenses during retirement.
- Estimate healthcare costs: Research and estimate your healthcare expenses during retirement, including costs not covered by Medicare. (See our Medicare presentation for more information on what to expect from these expenses). Consider purchasing long-term care insurance to protect against significant medical expenses that could potentially drain your retirement savings.
- Review Social Security benefits: Familiarize yourself with Social Security rules and determine the optimal time to begin receiving benefits. Waiting until full retirement age (FRA) or even beyond can result in higher monthly payments. Consider how Social Security fits into your overall retirement income plan. For more information please check out our Social Security Planning presentation.
- Plan for post-retirement activities: Think about how you want to spend your time during retirement. It is important to have an understanding PRIOR to retirement as to what you are going to retire TO. Consider hobbies, volunteer work, part-time employment, or other activities that can provide fulfillment and potentially supplement your income.
- Develop a retirement income strategy: Work with a financial advisor at Westminster Wealth Management to create a comprehensive retirement income strategy. Consider factors such as withdrawal rates, sustainable income sources, and the order in which you'll tap into different retirement accounts to minimize taxes and maximize income throughout retirement.
- Review insurance coverage: Assess your insurance needs, including life insurance, health insurance, and long-term care insurance. Make necessary adjustments to ensure you have appropriate coverage for your retirement years.