Retirement is one of the biggest transitions in your life, as you’ve likely spent the majority of your life working and once you retire, you’ll no longer have that identity and that source of income. This can be a jarring reality shift, both for your finances and your emotions, no matter how well prepared you feel. When planning for your retirement, it’s important to take into account your own life and preferences to determine when the best time to retire will be for you specifically, and to plan ahead for the transition to make it as smooth as possible.
Budget Ahead Of Time
Financial concerns are one of the most important concerns that most people have regarding their retirement, and for good reason – the whole point of retirement is to stop working, but when you stop working, you also stop bringing in an income. Prior to stopping that income, you need to understand your monthly expenses, and how they may or may not change once you retire. Consider everything within your budget, from your housing (will you continue to pay a mortgage or will your home be paid off? Will you move?) to your healthcare costs (your healthcare may costs may increase as you age) and your daily living expenses (will you be spending more money if you’re not working for example). While you’re still working, you may wish to pay down debts and reduce your costs. Working with a financial advisor may help you to get a better understanding of how prepared you are financially for you retirement.
Account For Inflation
When you’ve created a budget for your retirement, don’t forget to account for potential inflation. While you may have saved well and feel prepared, it’s important to factor in inflation into your equation to make sure that inflation doesn’t outpace what you have saved.
Adjust Your Strategy
As you get closer to your retirement, adjust your investment strategy as needed. Perhaps you need to review your investments and change allocations or adopt a more conservative approach. Ensure that your portfolio remains diversified throughout your saving to manage risk, and stay on top of reviewing your portfolio while you are investing to make sure that it aligns with your goals and risk tolerance. If you’ve been investing on your own, it may help to have a second set of eyes (such as a financial advisor or tax professional) review your finances with you to help you feel secure that you’re on track.
Plan For Your Time
One of the most shocking transitions in retirement is the downtime for many people that are used to the grind for their entire lives – it can be jarring to wake up with nothing to do suddenly. Plan ahead for how you’d like to spend your time in retirement by cultivating your hobbies now, and determine if you’d like to start new hobbies or ventures in your retirement years. You might wish to pursue part time job opportunities or volunteer work, or perhaps you’d like to take classes to learn a new skill. Or you may wish to take up exercise classes, or take care of your grandchildren. It helps to have an idea of how you’d like to spend your time once you’ve got it to spend, so that you’re not floundering and feeling lost.
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