Ready, Set, Retire! - Parsec Financial - Retirement Planning

Are you getting close to retirement age?  Have your started daydreaming about long, lazy days in the sun without a hectic schedule filling every minute?  Then perhaps it’s time to do something about that wishful thinking and take some concrete action to make a smooth transition to retired life.

Several years in advance of your actual retirement, you can take some steps to prepare and allow yourself to enjoy this milestone without the anxiety of the unknown.  So grab the sunscreen and take a bit of a retirement test drive.

1. Create a post-retirement budget and give it a trial run.

While it is true that some of your current expenses will be less in retirement, putting pencil to paper will give you a better idea of the true difference.   Creating a retirement budget and living with it may encourage you to set aside more money, alter the age you plan to retire, and prevent an unexpected surprise.  Also, if you have a travel bucket list, a budget will help make sure your plans align with your retirement income.

2. Pay down debt and reduce living expenses.

Pay off your highest interest rate debt first, usually credit cards, followed by car loans.  If you have a mortgage, talk to your financial advisor to determine if it should be paid off pre-retirement or if there are refinancing options.  You may not qualify for refinancing after retirement due to reduced income.  Other options to consider are downsizing to a less expensive and easier to maintain home or moving to a less expensive state.

3. Revisit your insurance needs.

Term life insurance is expensive when you get older and it may no longer be necessary for income replacement when you are retired.  You may, however, want to investigate long-term care insurance, which is less expensive to purchase in your 50’s than if you wait until later.

4. Develop a Social Security strategy.

Start educating yourself about social security at the Social Security Administration’s website.  Use the online tools to determine your estimated benefit amount and understand when to start claiming.  These decisions can be complicated, depending on your life circumstances, and may be a good topic of conversation for you and your financial advisor.

5. Evaluate your health insurance options.

If you plan to retire early, will you need an individual health insurance policy until you turn 65?  When Medicare begins, will you purchase a supplemental policy and what would it cost?

6. Reevaluate your asset allocation.

Is your allocation of equities to fixed income still appropriate or is it time to start shifting some assets?  Do you need additional liquid assets to cover moving expenses or home repairs?   Would consolidating retirement accounts make life less complicated and do you understand which accounts will require a yearly RMD (Required Minimum Distribution)?

7. Consider how you will spend your time.

Think about how you want to use that hard-earned free time.  Do you plan to work part-time at something you enjoy or volunteer?  Prior to retirement, try a few of the options you’re considering; start building skills and a network of contacts.  Staying involved is good for your health as well as your pocketbook and it prevents you from spending money out of boredom.  Retail therapy may not be the best retirement plan for you!

8. Seek help from your financial advisor and CPA.

Determining how much to draw from your retirement savings each year so it lasts for your lifetime and which account, taxable or non-taxable,  is best to use for distributions requires careful financial planning and tax planning expertise.   This is why you have a Parsec team.  Don’t wait until you are already retired to have a planning conversation!

Nancy Blackman, CFP®
Portfolio Manager