Older couple on white background, happy following financial planning near retirementRetirement is one of the most significant events in your life. It also makes it one of the most critical financial planning decisions. A solid retirement plan provides financial and psychological assurance. Careful financial planning as you prepare to retire can support earlier planning and saving efforts, tie up any loose ends, and help to ensure a successful retirement. Here’s what you should focus on as you’re nearing the countdown. 

Know Your Health Insurance Coverage And Costs In Retirement

Health insurance is a large expense, sometimes second only to your mortgage. To protect your physical and financial wellbeing during retirement, it’s critical to know in advance how your health coverage and coverage costs might change.

If you’re retiring before age 65, the age at which you become eligible for Medicare, it’s important to compare COBRA and open market rates. Health insurance coverage for individuals in their 60s can easily top $1,000 per month.

Even if you’re covered by Medicare, it’s important to know how much your Social Security check will be diluted by Medicare premiums, plus any supplemental coverage or other out-of-pocket medical costs.

Manage Sick And Vacation Leave Prior To Retirement

Sometimes it’s best to use up your sick and vacation leave before you retire, but this isn’t always the case, particularly if you’re eligible for a pension. Pensions are frequently based upon years of service, and you may be able to allocate accumulated sick and vacation days towards a higher pension payment. The financial benefits of doing so could far outweigh the short-term benefits of using the leave.

Consider Your Financing Needs While You’re Still Employed And Can Qualify

A significant financial change associated with retirement that’s often overlooked is your ability to qualify for a loan, particularly a mortgage. If you’re thinking of applying for a loan, moving house, or refinancing your home, explore your loan qualification potential with a lender while you’re still employed.

You should also consider securing a home equity line of credit (HELOC), while you still have the income to qualify. You shouldn’t draw upon the line of credit before entering retirement, but securing a line gives you the ability to access capital in the event of an emergency.

Pay Off Your Credit Cards Before You Retire

If you have credit card debt, the year before retirement (if not sooner!!) is the time to pay it off and say goodbye for good to recurring balances. Make sure you can live credit card debt-free before you formalize your transition into retirement.

Don’t Advance All Of Your Expenses Before Retirement

Individuals contemplating retirement frequently advance large anticipated expenses with the notion of eliminating a worry. While some advance purchases might be smart (particularly if the dollar amounts are unknown and could destabilize your retirement finances), others aren’t. Before you make any large purchases during the lead-up to your retirement, ask yourself if the item still has a viable lifespan, e.g. replacing a car that could stay road-worthy for many years, or replacing a roof early.

On the other hand, it’s certainly important to embed future such expenses in your retirement budget. Even something that’s new now will eventually need replacing. Make sure you plan for anticipated future expenses in your retirement planning projections.

Be Realistic About Your Retirement Needs

One of the most important actions before you commit to retirement is to assess your retirement needs, relative to your future income and available assets. We advise taking a critical look at actual spending figures over the past few years, versus simply summing your monthly expenses. You may be surprised; things like new tires, vacations, and other non-recurring expenses can significantly impact your budget.

Finalize Your Retirement Plan

If you haven’t already done so, engage with a retirement planning specialist, such as a Certified Financial Planner (TM), to critically evaluate your retirement preparedness. There’s a lot to consider, such as spending, taxes, Social Security, and more.

SageVest Wealth Management typically embeds several ‘what-if’ planning scenarios in client projections, to help you visualize your finances in retirement e.g, what if spending is $10,000 higher in retirement, as you occupy the 40 hours a week you’re no longer working?

Consider Part-Time Hours, A Leave Of Absence, Or Sabbatical Prior To Retirement

While some individuals might be able to return to work if needed, for most people this can prove challenging, particularly once you have a gap in employment and considering the potential for age discrimination. If you’re not sure about retirement, particularly the psychological transition or financial aspects, consider working part-time or explore a leave of absence or sabbatical. This might allow you to ‘test-drive’ retirement without committing in full.

SageVest Wealth Management is a fee-only, independent investment management and financial planning company, serving VA, MD and DC, and beyond. We offer customized, comprehensive retirement planning that focuses on connecting you with your wealth in the most meaningful way. Please contact us to discuss your unique retirement goals.

Prepared by SageVest Wealth Management. Copyright 2018.

The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. This article is for informational purposes only. The views expressed are those of SageVest Wealth Management and should not be construed as investment advice. All expressions of opinions are subject to change and past performance is no guarantee of future results. SageVest Wealth Management does not render legal, tax, or accounting services. Accordingly, you, your attorneys and your accountants are ultimately responsible for determining the legal, tax and accounting consequences of any suggestions offered herein.

In accordance with IRS CIRCULAR 230, we inform you that any U.S. Federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of (a) avoiding penalties under the Internal Revenue Code or that may otherwise be imposed on the taxpayer by any government taxing authority or agency, or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein.

The provision of a link to any third party website does not mean that SageVest endorses that website. If you visit any website via a link provided here, you do so at your own risk and indemnify SageVest from any loss or damage incurred.