How to Prepare for Retirement

older couple preparing for retirement

Everyone has a different vision of what retirement looks like for them. For some, it’s traveling the world. For others, it’s spending time with friends and family or even starting a business. So, how you prepare for retirement depends on how you want to spend your senior years. Still, there are basic steps you can take now to prepare for a post-work life.

Defining What Retirement Means

Before you can prepare for retirement, you need to define it. And that can start by envisioning what you’ll be doing during your retirement years.

“I ask people how old they are now,” says Rich Zanghetti, managing director of Lion’s Bridge Wealth Management, “then I ask them to fast-forward. You’re 72. It’s a Tuesday afternoon. What are you doing? Playing golf with friends? Writing a mystery novel? Or are you coming home from a month of sailing the Intracoastal?”

Having a clear vision of what retirement looks like for you is critical. “It has a big impact,” says Zanghetti. “Then, you can start laying the groundwork.”

Jennifer Lee, investment advisor representative, founder of Modern-Wealth, and author of “Squeeze the Juice: Live with Purpose – Then Leave a Legacy,” explains there are two steps to laying the groundwork for retirement.

The first step starts 10 years before you plan to retire.

Maximize Retirement Savings

“These are your crush-it years,” says Lee. “Kiddos are out of the house and, hopefully, off the payroll, your bills are manageable, perhaps there’s a little more cash in your accounts, and you have some breathing room in your life.”

It’s tempting to start spending a little freer on home improvements, maybe travel more, but this is actually a critical time to rein in spending and build your retirement fund. The key during this period is to maximize all saving opportunities.

“Make sure you get all of the free money provided to you through matching programs, enroll in deferred compensation plans (if eligible), and fully fund your Roth IRAs,” says Lee.

Think of it as padding. You’re giving yourself some cushion against the unexpected things that can pop up once you’ve stopped working.

Lee’s second step is to understand how much money you will have coming in, and where it needs to go.

Consider Cash-Flow

“This is where you consider what your cash flow needs are now versus when you’re retired,” Lee advises. “It’s an important consideration. You need to understand how your needs will differ once you’re retired.”

During this time, Lee thinks you should get all your ducks in a row. Take inventory of what you’ve accumulated and look at the quality of life you’re setting yourself up for.

Jonathan Howard, a financial planner at SeaCure Advisors, explains “you must determine what the retiring household will need in monthly income, taking into account income floors like Social Security, pensions, annuities, part-time employment, and any other income source that will flow into the household without having to tap savings.”

Collect information about all the different retirement plans you have and evaluate the timing of when to take Social Security.

“Pay close attention to outstanding debts,” warns Howard. “If income floors don’t cover all expenses, then the household will need to put together a plan for how they will take savings distributions. For this reason, if the household hasn’t started a budget, now is the time to do so. Otherwise, the retiree will be flying blind.”

List Resources

To understand cashflow, make a list of all your income sources. These include:

  • Cash
  • Pension
  • Social Security
  • Personal investment
  • Real estate
  • IRAs (Roth or regular)
  • Retirement savings, e.g., 401k, 403B, 457, SIMPLE, health savings account, etc.

Thanasi Panagiotakopolous, principal at LifeManaged, advises retirees to do the hard thinking about retirement well ahead of time, so you’re not carrying the decision-making burden into your free time.

Try to get all this stuff done before you retire,” says Zanghetti. “So, when you go into retirement, you don’t have this list of things to do because you put everything off. And while you prepare for retirement, don’t forget to take care of yourself. Get [medical] things done before you retire, even if it’s just a little procedure.”

According to Zanghetti, good planning can set you up for a more carefree retirement so you can start your golden years in health of body, mind, and finances.

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