5 Important Steps to Prepare for Retirement

by Justin on July 12, 2015

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Retirement is the last major transition in your life. It’s when you leave the workforce after forty or more years to enjoy many happy years of bliss. But there is still work to be done to make the move into retirement as smoothly as possible. If you have to ask yourself “What does IRA Stand for?” Then chances are you have a lot of catching up to do!

You must make sure you take these five steps to properly prepare for retirement.

 

Create a Spending Plan

In retirement your income is going to be severely depleted. You have to monitor your money closely, and that means creating a spending plan.

Gather some statements and see how much you need to pay your bills every month, including food. After that, leave a little bit for luxuries. This will ensure your money goes further and you don’t have to worry about running out of funds.

 

A Rolling 401(k)

If you have a 401(k), you can cash it out, keeping it with your employer, or rolling it into an IRA. Don’t cash out your money. You’ll get hit by a massive tax bill, which can go up to 10% if you’re under 59. If your employer’s 401(k) is good, it may be best to keep the money in there.

In most cases, though, it’s better to opt for a rollover IRA. This will offer you a larger selection of investments, which could lead to a better income for you.

If you want something less risky you can always look to invest in gold, commodities can offer a safe haven from the constant fluctuation of rates and equities.

 

Investment Portfolio Review

Your regular income is gone, so you will need to come up with a way to replace at least part of it. This can be done through reviewing your investment portfolio and deciding where to make some moves. At this point, you should opt for low-risk investments. If something goes wrong, you will have little chance of getting that money back.

Bonds are better than stocks, to give you an example.

When you retire, it’s an ideal time to review your portfolio and sit down with your broker. Make the conversion to a retirement-based portfolio as soon as you can.

 

Social Security Benefits Claim

Always apply for your Social Security benefits three months before you actually want them. The earliest you can claim these is 62. Sometimes it’s better to wait, though. Benefits aren’t as high if you claim them before the actual retirement age. The Social Security Administration says you get 8% more per month for every year you delay claiming.

If you can delay them, you should.

 

Register for Medicare

Medicare will cover any health costs during your retirement if you’re disabled or already 65. If you claim Social Security prior to reaching 65, you’ll already be enrolled in hospital insurance, with doctor coverage coming once you reach 65.

Consider some private coverage, such as Medigap to help you cover those final expenses, since Medicare won’t always cover everything.

Overall, these five steps to take will set you up financially for a happy and healthy retirement. You can find some additional tips in this article.  It’s always best to speak to an investment expert before making anything final, though. They can offer tailor-made advice to help you make the right decisions.

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