It’s natural to have mixed feelings about retirement – it’s a huge life change that people spend most of their working lives preparing for. While the idea of retirement is exciting, the options and advice available can sometimes seem overwhelming and complex. There are several simple things you can do if you are feeling unprepared for your retirement years. Check out the following steps to help you prepare for this important step.
1. Determine your vision. One of the most enjoyable parts of planning for retirement is deciding how you are going to spend your time. While you just want to relax, you may also decide to relocate to another part of the country, travel, volunteer, or spend more time with family and friends. Your plans can always change, but creating a list of activities you might want to pursue is a fun and valuable part of the planning process.
2. Start with the basics. Developing a written plan is the first important step, but before you get carried away by the numbers, figure out what you absolutely need to cover the really essential expenses. Include basics like groceries, mortgage payments, health care costs, and other financial obligations. You might want to make a list of areas where you could cut and cut your spending if you run into a financial hurdle in the future.
3. Make your projects a reality. Many people cling to this step because it can come with a difficult reality check. To get started, figure out how much money you’ll need to cover your basic needs over the course of a 30-year retirement, then add in the discretionary expenses that come with activities and lifestyle goals, such as travel and entertainment. Hobbies. Be honest with yourself and try to factor increases in the cost of living and health care costs into your projections. This will give you a rough estimate of the “income” you will need in retirement to replace your paycheck and achieve your desired lifestyle. Next, consider whatever sources you can derive that income from – like a 401 (k), annuities, or cash savings. Also, consider breaking that amount down into smaller goals that you can more easily prioritize, manage, and track.
4. Protect your plan and your legacy. Make sure the beneficiary information on your accounts is up to date, and that you’ve got the right insurance and protection plans in place to protect your income and assets now – and in the long term. Also start thinking about what legacy you want to leave – your family or organizations that are important to you. Involve your loved ones in these conversations and clearly communicate your intentions and expectations.
5. Track your progress. As with all goals, it’s important to set milestones, register, and think as you go. Keep in mind that a little time and organization goes a long way. Set aside one day per month to sit down with your finances, and also consider meeting with a legal and financial professional each year. Even if your goals still seem far away or you’ve experienced a setback, you won’t regret spending the extra time reviewing your progress. It also provides a good opportunity to make adjustments if your situation or future plans have changed.
Planning for retirement can be a complicated, emotional and overwhelming process. Consider seeking objective advice from a professional financial advisor who can guide you and make sure you know all of your options. It’s important to keep in mind that the surest way to be confident about what is going to happen is to do whatever you can to prepare for it.