You have had a long and successful career, and now you are nearing retirement. It will be a big change and require preparation and planning. Here are some things you need to do to get ready.
Figure out what your needs will be in retirement.
Retirement is not cheap. Financial experts estimate that you will need 70 to 90% of the income you made while working to maintain the same lifestyle after you retire. Again, planning is key. Healthcare is likely to be more expensive, while expenses for things like driving and clothing may go down.
The U.S. government has two publications to help – Savings Fitness: A Guide to Your Money and Financial Future. If you are nearing retirement, there is Taking the Mystery Out of Retirement Planning. You can order copies by contacting the Employee Benefits Security Administration at askebsa.dol.gov.
Tend to your investments.
Your investment portfolio should be well-diversified among stocks, bonds, mutual funds and other assets. The exact proportions will vary depending on how much longer you intend to work and how much risk you can tolerate. In general, the longer you intend to work, the more your investments should be weighted toward stocks.
A well-diversified investment approach will help you to generate income while at the same time giving you some protection against downturns in the stock market.
Contribute to retirement accounts.
No matter where you are at in your career, nearing retirement or not, you need to take full advantage of company retirement accounts and contribute the maximum allowed to receive the most matching funds from the company.
If you are older than 50, some exemptions may allow you to put in more than is normally allowed as a way of catching up. This is another opportunity to take advantage of.
Also, as you get closer to retirement, it is a good idea to consolidate accounts you may have from different employers and roll them over into one account to simplify things.
Reduce your debt.
This will help so that you aren’t spending retirement income on interest payments. Try to pay off your mortgage before you retire and eliminate your credit card debt.
Estimate what your retirement income will be.
To do this, you will need to check how much Social Security income you will receive, what percentage of your investments you can use annually, and any other income sources, such as wages or savings.
There is a traditional rule of thumb that you should only use about 4% of your investments each year to be sure the money lasts for your entire lifetime. This is only a rough guide, however, and how much you use will depend a lot on your situation, such as your age and tolerance for risk.
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