Time to Retire? Not Till You Do These 3 Things
Key Points
Before you retire, make sure you figure out what expenses you'll be looking at.
Also figure out where your income will come from.
Have a plan for keeping busy so you don't end up unhappy.
If you're gearing up to retire, you may be excited to reclaim your time and not have a job to report to daily. But it's important to go into retirement prepared. That means tackling these three must-dos first.
1. Figure out what it will cost
The expenses you're on the hook for today may not be the exact same expenses you'll face in retirement. You might spend less money on gas and tolls in the absence of a commute, but more money on utilities due to being home more often.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
Also, if you're switching from a workplace health insurance plan to Medicare, you may be looking at a whole new set of premiums, deductibles, and copays. Make sure to map out a comprehensive budget so you know what costs to expect.
2. Figure out what income streams you'll have
You may have multiple income sources at your disposal, including Social Security and the savings you've built. Now's the time to see what those look like and what annual income they might provide. It's important that the amount of money you have available matches the budget you've set up.
Of course, this exercise isn't just a matter of listing income streams. In the context of Social Security, you'll need to decide when to claim benefits, as that will have an impact on the amount of money you collect each month.
And as far as your savings are concerned, you'll need to figure out a withdrawal rate you're comfortable with based on your retirement age and investment mix. That will tell how much income to expect and whether tweaks in your budget are necessary.
3. Figure out what you'll do with your time
For many people, work provides more than an income. It also provides structure, purpose, and daily social interaction.
Once you stop working, you may find yourself missing all of those things. So it's important to have a sense of how you'll spend your days in retirement.
Think about what excites you outside of work. It may be traveling, volunteering, spending more time with your grandkids, or finally tackling those home improvement projects you postponed for years.
Having meaningful goals and a solid plan could help make retirement more rewarding from the start. It could also help you avoid feeling bored and unhappy.
Retirement is a major milestone, and it's one you should feel prepared for before it begins. Make sure you know what it'll cost, whether your income streams support your estimated expenses, and what you'll keep busy with so you can approach it with more confidence.
The Motley Fool has a disclosure policy.