Whether you planned to retire in 2021 or are heading into retirement due to other pressures, there are steps that you can take before you leave your full-time job. For example, you may need to decide what to do with your 401(k), how to access any pension available, and what your retirement budget will be.
Determine Your Budget
The budget that worked when you were working will need attention before you move into retirement. For example, your working budget may include:
- professional organizations and events
- vacation travel
and many other expenses that will go away very soon.
That being said, your early retirement phase may result in higher expenses while you determine which activities will take the most time each day. You may choose to go on the trip of a lifetime, take a class or start a new hobby. Your budget will need to change to encompass those new activities.
Cover Critical Needs
If you had insurance through your employer for you and your spouse, you will likely have signed up for Medicare. If your spouse isn't old enough for Medicare, you may need to buy private insurance until they can also be signed up.
Once these critical needs are covered, it's time to take a look at your social security options. Waiting until 70 is the best way to receive the fullest benefit amount. If you and your spouse agree, you can choose to take one spouse's benefits early and wait on the other spouse's benefits, living off investments and pension income.
While many choose to downsize in retirement, there is also a movement of upsizing. For example, if you plan to stay in your current location but want to be able to:
- have long-term guests
- set up a workout room
- create a second office
- spread out on one level for safer aging in place
then upsizing may be an ideal choice for your situation. You may also prefer to build a larger home in which you enjoy your retirement.
The travel challenges of 2020 and in the future may have you searching for the best way to enjoy retirement locally. As the events of the pandemic shake out and settle down, more travel options may open up.
Until then, many hoping to retire soon and do more traveling are focused on Airbnb stays instead of hotels. Until you can feel safe in a hotel or on a cruise ship, vacation travel that reduces your exposure to crowds may be the safest choice.
Your "Pre-Tired" Checklist
Before you start packing up your desk and redistributing your workload, consider using your benefits to the fullest. Schedule one more doctor's appointment, go ahead and get new glasses, sign up for another year at your gym at the discounted rate, and take care of your charitable giving that receives a match.
Move Your Investments
If you have an IRA in place and are happy with the return on those dollars but can't utilize those funds in your 401(k), take steps to roll the 401(k) before you leave. Do make sure that your employer's retirement fund manager is aware that this is a rollover; if you get the payout directed to you, there may be serious tax implications. Rolling your 401(k) to a traditional IRA may result in a fee, but both are pre-tax accounts.
The uncertainty of 2020 may mean that your retirement options have grown. If you planned to sell your current home and downsize, you may be pleasantly surprised at the value of your current home. Take your time and avoid the pressure of trying to do too much at once.
Are you ready to discuss your financial goals with Gilbert, Arizona's Most Successful Dave Ramsey Smartvestor Pro?
East Valley Smartvestor Pro Financial Goal Planning and Retirement Planning Advisor. Serving the East Valley Region of Greater Phoenix area. Watch the video of your city below.
Chandler, AZ: Your Dave Ramsey Smartvestor Pro
Queen Creek, AZ: Retirement Financial Goal Planning
Mesa, AZ: Saving for Education with 529 Plans
Tempe, AZ: Women, Pensions, 401k & Divorce