If you have been thinking about retirement but put it off because your investments in the stock market had altered your finances, now may be the time to reconsider. With the stock market at an all time high, many seniors who were waiting for things to turn around have realized this may be as good as it gets. Plus, all that time off over the holidays may have convinced you are indeed ready to stop working.
But before you take that big step, there are some things to consider. Experts tell us that too many people near retirement have never ever tried to figure out how much money they will need for retirement or how much they actually have in savings and investments. So think about how much you will need to live on and the sources: Social Security, IRAs, pensions, savings, or investments. If you don’t think it will be enough, think about transitioning to part time work before you retire completely.
If you truly haven’t saved enough, consider working a few more years. By working and saving, you can make your retirement easier. And don’t think of work as a punishment. For many people, work provides purpose, structure and a community, and unless you have a plan to replace those in your post career life, you may wish you were still working. A few more years of income and contributing to your 401k or other retirement plans can really make a difference.
You should also consider paying off credit card debt if you can. Paying off some of your mortgage might help as well, as it will reduce your monthly payments in the years ahead.
Then, if you are really sure you are ready to leave your job, do it carefully. Be sure you understand the fine points of your pension or investment plan when you sign your retirement papers .If you are under 65, will you still have employer-provided health insurance? Will your spouse be covered as well? What about life insurance, other spousal benefits, and will any of these affect your beneficiaries?
Be sure you understand options for tapping your pension or retirement plan. Decide if you want to let your 401(k) stay put or roll it over to an outside plan. By writing a check to yourself and putting it in the bank you will be subject to taxes of 20%, so be sure to keep those funds in the 401k plan as long as you can. It is important to understand all this so you don’t pay unnecessary taxes and that your cash lasts as long as possible. Also, if you have been a little risky with your investments until now, consider changing to more conservative funds like those with a fixed income.
Once you have figured out where you money is and how much there is, consider hiring a financial planner. There will probably be fees involved, so be sure you know what those are and what you are paying for. When you receive your statements, read them! If you don’t understand something, ask about it until you do. And don’t sign anything until you are satisfied that you truly understand it. If you prefer handling your financial plan yourself, be sure you understand the tax codes and consequences. Free help is available through AARP, mindyourfinances.com, and 360financialliteracy.org.
It is clear that Boomers plan to retire differently from their parents, but different is not always better. Earlier generations retired and cut back on their expenses; today’s retirees want to retire and keep spending as if income was continuous! But it is better to be prepared. This generation is healthier, is living longer and will need more money so they can travel, support their children or start new ventures. Simply maintaining a household requires constant infusions of cash for repairs, repainting or remodels. In estate planning, as in all of life, things change.