Retirement is one of the most important life events you will experience, and getting it right takes wise planning. With a sound intellectual framework, and some assistance from a qualified professional, you can ensure that you are ready to retire when the day comes.
Retirement preparation can be broken down into five phases, with each phase having its own unique strategy. Regardless of which phase you currently fit into, make sure you have completed the tasks in the previous category before moving on to the next. Here are the key aspects to carry out during the five phases of retirement.
Top Preparing for Retirement Expert Advice for Young Adults to Seniors
30 Years Before Retirement: How to Prepare for Retirement in Your 20s and 30s
Why do many young adults skip this retirement planning step? Because retirement seems so far away, and with bills, a mortgage, and kids, saving for this distant period of life seems less important. However, this first planning step is usually the most important in any retirement planning strategy.
When you’re 30 years away from your planned commencement of retirement, you want to make sure you have some tax-advantaged accounts open and you’re contributing money to them consistently.
Are you an employee?
If your employer offers a company match, that’s a 100% return on your financial contributions. Make it your goal to contribute enought for the full employer match. Don’t leave free money on the table!
Consider opening an IRA – it will allow you to save even more every year – and it can offer tax breaks like an employer’s plan.
20 Years Before Retirement: How to Prepare for Retirement in Your 40s and 50s
When you get to your 20-year milestone, be sure to review your retirement accounts and verify that you’re saving enough each month. Can you increase your retirement contributions by 1-3%?
You’ll want to figure the amount you’ll need when retirements starts. Estimate future monthly expenses and then calculate how much you need to save now to reach that level. A financial professional comes in handy here.
This phase is also a good time to start looking over other financial vehicles that could be of use during retirement. These include life insurance, disability insurance, and long-term care insurance.
10 Years Before Retirement: How to Prepare for Retirement in Your 50s
This is the time to consider catch-up contributions.
What are catch-up contributions?
These are additional retirement account contributions the IRS allows (starting at age 50). As with regular contributions, catch-up funds receive special tax treatment.
With a qualified estate lawyer or financial planner, draw up an estate plan. Include your last will and testament. Open transfer-on-death brokerage accounts and payable-on-death bank accounts.
Phase three is also a good time to review your tax situation as it pertains to retirement planning. If you started saving money in the first stage with a traditional account, but now you’re making more money and you think you’ll be in a higher tax bracket in retirement, you may want to consider opening a Roth IRA, which allows for tax-free withdrawals.
5 Years Before Retirement: How to Prepare for Retirement in Your 60s
In the fourth phase, you need to begin thinking about what you want out of retirement. It can help to create a list of your requirements and preferences. Requirements are “must-haves,” like monthly income for living comfortably. Preferences are aspirations that you would like to achieve but are lower on the list of priorities. This might include major vacations, building education savings accounts for grandchildren, or moving to a warmer climate.
1 Year Before Retirement: How to Prepare for Retirement as a Senior
Are you one year from retirement? Review your current retirement plan and make sure everything is ready.
Will your health insurance plan continue into retirement?
If you’re going to lose health insurance from your employer, you’ll need to make sure you have signed up for Medicare or have some other alternative.
Do you have enough savings in your retirement accounts?
If not, consider delaying retirement for another year or two. While this may not be an ideal choice, it may be a way around an otherwise difficult problem.
On a personal level, what will you do with your time in retirement?
Now is a good time to take a look at how you might expand on your hobbies, interests, recreation, and charitable endeavors.
From beginning to end, the tax, legal, and financial aspects of retirement planning are complicated for just about anyone. If you need any assistance along the way, please contact our retirement planning experts to see how we can help.