If you’re approaching retirement this year, you’re not alone. Indeed, more Americans plan to retire in the coming year — with 22% saying they are likely to retire in 2024, up from 17% in 2022, according to an Allianz report.
Meanwhile, for baby boomers who are currently working, 31% say they are likely to retire in 2024, up from 25% in 2022.
While preparing for retirement is a long road, both in terms of financial planning and getting mentally prepared for a big lifestyle change, there are some important steps you can take as it nears, to allow for an easier transition into your golden years.
“Getting ready for retirement is an ongoing process that ideally starts when we get our first paycheck, possibly as teenagers,” said Bobbi Rebell, CFP, founder of Financial Wellness Strategies and author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Be Everyday Money Smart.”
“But as people get closer to their retirement age, it becomes time to start number crunching and look realistically at when the next phase of life looks like financial grown-ups.”
Have a Plan
The most important thing for boomers preparing to retire is to make sure they have a plan — in other words, being clear on your goals as you approach retirement can make a considerable impact in both ensuring your savings last and helping you live the retirement lifestyle you envision, said Rita Assaf, vice president of retirement products at Fidelity.
“Start by reviewing your investment mix to ensure you aren’t taking more risk than is necessary for your time horizon. You may want to consider shifting some of your portfolio into income-producing assets like bonds or dividend-paying stocks,” Assaf said.
That being said, many people are tempted to become too conservative during retirement, so make sure you include some longer-term growth potential in your portfolio as well to potentially help your savings last throughout your retirement, she advised.
“An ideal mix will depend on a number of factors, so speaking with a financial professional is the best way to help you rebalance your portfolio to get the right asset mix to help you reach your goals,” she said.
Another important factor to take into consideration is making sure you have enough savings to support your new lifestyle and handle unexpected expenses.
“Building and maintaining an emergency fund becomes more challenging with limited income,” said Joe Camberato, CEO, National Business CEO, National Business Capital. “Establish this fund well before retirement so it can act as a safety net.”
Know What Your Income Sources Will Be
These can include Social Security, pensions and IRAs, for example — and you’ll want to know what your strategy will be for taking income from these accounts.
Assaf recommended grouping these accounts into two buckets: guaranteed income from sources such as Social Security, pensions and annuities; and variable income from retirement savings, a part-time job or other sources like rental real estate.
“Once you estimate your retirement expenses, you can map out ways to meet essential expenses with your guaranteed income sources — life’s ‘need-to-haves’ — and pay for discretionary expenses with variable income — life’s ‘nice-to-haves.’” she added.
And as Steve Sexton, CEO of Sexton Advisory Group, said, the more diversified your sources of retirement income, the better. In addition, understanding how much you can expect to receive via Social Security is a key step before you retire, he added.
“If you already have a diversified source of retirement income, it’s possible you can put off collecting on your Social Security benefits and receive a bigger paycheck in the long run,” he said.
Make Sure You Understand Your Healthcare Options
Finally, make sure you understand your healthcare options in retirement. As Assaf noted, Fidelity estimates that the average 65-year-old individual retiring in 2023 could spend $157,500 on health expenses in retirement, so having a plan in place for when you leave your employer is incredibly important.
“Possibilities could include staying on the insurance of a working spouse, enrolling in a plan through the Affordable Care Act marketplace, private insurance, or continuing on your current plan for the first 18 months under COBRA,” she added.
Evaluate Your Insurance
For instance, if you will no longer be working at all — versus semi-retiring — you’ll no longer need disability insurance, said Kyle Enright, president of Achieve Lending.
You may also no longer need a large life insurance policy if you’re not supporting dependents and you will need to pay for Medicare — it’s not free — along with a supplement and prescription drug policy, Enright said.
“Make sure to visit the Medicare website and learn about costs and options; you must apply for Medicare within three months of your 65th birthday,” he said.
He also noted that if you have auto and homeowner’s — or renter’s — insurance, now is a good time to obtain and compare quotes to make sure you’re getting the right coverage and all eligible discounts.
“If you own your home, you may be eligible for a senior property tax exemption. Most states offer some form of this, which reduces the amount required to pay in taxes. Do an online search to find out about exemptions in your state, and be sure to note deadlines for filing,” he added.
Review Your Estate Planning and Think About Lifestyle Changes
Rebell also advised going over your estate planning documents and making sure they are up to date including a healthcare proxy.
In addition, she said it’s necessary to think about lifestyle and changes you might want to make — for instance, do you want to move closer to family? Do you want to live somewhere with lower taxes and other lower costs? Will you want to vacation more? In addition, she noted that it’s important to consider whether you want to keep working to bring in income, or whether the earnings from those investments will be enough to cover your expenses.
“The stakes are very high so for most of us, a DIY approach alone can be precarious. Consider bringing in a professional to confirm your assessment of your assets, investments and resources, discuss your financial goals, and work with you and your family on putting together plans and regular check-ins,” she added.
