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Maybe you’re looking forward to retiring early—or maybe you’re dreading it. Either way, you’re almost there—and now is the time to start thinking about how to prepare. Here are a few ways you can make sure you’re ready for retirement when it comes.
Know what you’ll need before retiring
The typical formula is that you’ll need 70% of your current working income to maintain your standard of living in retirement. For lower-income workers, that figure could be as much as 90%.
So how will you get that money? Pension plans, Social Security, 401(k)’s—if you’re close to retirement age, chances are you’ve thought about these things already—and started investing.
But as you near the age of retirement, you might want to sit down and think about the amount of money you’ll need to live in retirement. Find out how much is in your current retirement accounts—and how much you can expect to receive from pensions, Social Security, and other sources. Does it make ends meet? If not, you may want to talk to a retirement planner—or consider making some major lifestyle changes as you near retirement age.
Research your Social Security benefits
Depending on the age you retire, you may or may not be able to start withdrawing Social Security benefits right away. Nor would you want to, in some situations. The earliest you can start withdrawing Social Security is 62, but there are significant financial penalties for additional earnings if you withdraw before your Normal Retirement Age as determined by the government. Know your own Social Security situation—and know when you should start withdrawing.
Finding the best place to retire. Where you live makes a huge impact on your quality of life as a retiree. Maybe you’ve never considered moving for retirement—but you should. Some states give significant tax breaks to retirement income—so your retirement savings will last longer in some states than in others. In addition, as you age, you may be grateful you chose to live in a city with a great public transportation network and good hospitals near your house—so you can maintain independence longer.
Find out what the situation is for retirees in your state and town—tax-wise and in terms of public transportation and medical facilities. If the situation doesn’t look good, you may want to consider a move—even if it puts you farther from friends and family.
Consider the insurance you need
As you retire, certain types of insurance become more important. Long-term care insurance, for instance. Did you know that non-medical long-term care isn’t covered by Medicare or most private health insurance plans? You may need in-home assistance to maintain your independence later—and this care can be expensive if you don’t have an insurance plan.
Life insurance can be important, too—especially if you have dependents. Same with disability insurance, which can take care of you if you’re struck with a disability that prevents you from working. If you don’t have this insurance and you have to quit your job before retirement because of a disability, you may not be able to get all your retirement contributions.
Retirement can be difficult—especially if you don’t have the financial resources to support yourself. As you near retirement age, there are a few things to think about that will help you prepare for this change. Assess your financial position—and develop a realistic picture of how much money you’ll need and how much you can expect to have.
Know your situation with Social Security—those extra monthly payments could make a big difference in your quality of life, but be sure you won’t be subject to penalties. And know how welcoming your state and town is to retirees. If the environment isn’t hospitable—high taxes, poor or remote hospitals, and no public transportation, for instance—you may want to consider a move.