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Financial considerations to make as you approach retirement

Five Important Financial Considerations to Make as You Approach Retirement

You’re almost there – your well-earned retirement is just a few years away. It is exciting, for sure! However, this is an important time for you to prepare and plan for the realities of your post-retirement life. Some key issues worth looking at include:

1) Healthcare expenses

Research shows us that couples who retire at the age of 65 in the United States will need almost $250,000 to cover their health care expenses during their retirement. Estimates conclude that Medicare will cover approximately 50-60% of that amount, so the remainder will need to come from your pocket, so you need to come up with a game-plan to handle healthcare expenses.

2) Keep investing smartly

Most likely, if you are already approaching retirement you have a decent sum of money socked away in an IRA or 401(k). If so, great job! However, now is not the time to cash out. It is important to keep investing as you approach retirement, and even into retirement itself.

You may wish to change how you invest though. The closer you get to retirement, the further you should move away from investing in comparatively risky stocks and re-route those funds towards the much safer bond market. It is always wise to speak with a financial adviser prior to making any big decisions in that regard.

3) Plan your taxes

If your retirement funds are in some combination of Roth IRAs, Traditional IRAs, and 401(k)s, you will need to speak with a financial adviser or CPA about how to withdraw your funds over time in the most tax-advantaged way. This is because some of your retirements are pre-tax, while others are post-tax. Planning is needed to keep your annual tax bill as low as possible in retirement.

4) Consider downsizing your home

Most people purchase their homes in their twenties or thirties, just around the same time that they start having kids. As such, many retirees find themselves living in homes that can accommodate a larger family, even though they do not need that additional space. In this case, it is worth exploring downsizing your home to something more suitable for your current and future needs.

5) Maximize your Social Security benefits

You have contributed to Social Security for your entire working life and now it’s time to cash out. However, you also need to spend some time looking at your options with it comes to Social Security. While it is possible to cash out at the age of 62, you will greatly reduce your monthly checks when compared to cashing out just a few years later. Speak with your adviser to decide if that is a good trade-off for you, or if you should wait the additional time.

With a little planning and patience, your retirement can be everything you always dreamed – both personally and financially. Enjoy it!


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