5 Things to Accomplish Before You Retire

Others fret about their future as they approach retirement, while some look forward to the day when they can put their working life behind them. Regardless of your perspective, doing the following activities before retirement can assist in a seamless transition to the next phase of your life.

1. Review your goals

When was the last time you gave your retirement objectives any serious thought? Not just your short-term objectives, like traveling a different country, but also your objectives for how you want to live during retirement. Where do you want to reside? What activities do you have planned? Who will you encircle yourself with? What activities or chances will give you a sense of fulfillment and purpose?

You may visualize your perfect retirement by using the answers to these questions. Make decisions based on this vision to keep you focused on attaining your most critical objectives.

2. Set up a budget

It’s time to estimate the cost of your retirement now that you have a general concept of what you want it to entail. Making a monthly budget is essential since switching from living off a regular wage to living off savings can be challenging.

Estimate your monthly spending for the first year of retirement to start. Calculate the monthly withdrawal amount from your funds using this data.

Your financial planner may assist you in creating a monthly budget and identifying any gaps that would need to be addressed by taking into account your savings and investments, lifestyle objectives, other sources of income, as well as existing and projected spending.

3. Plan for market volatility and inflation

Many soon-to-be retirees hold the misperception that as they get closer to retirement, they should convert all of their riskier, growth-oriented assets into more conservative products like CDs and bonds. Although it’s true that retirees require money in the short term, many stay in retirement for 20 to 30 years. You will miss out on a lot of gain and lose a lot of buying power to inflation over the following several decades if you retire at age 65 and put all of your savings into short-term vehicles. You must support your lifestyle while making long-term investments. Consult with a qualified wealth manager to help you design a customized portfolio that is tailored to your short- and long-term needs according to your risk profile. This will usually involve a balanced mix of cash, income producing assets for your immediate retirement income needs, and equity assets for long-term growth to combat inflation risk.

4. Understand Your Health Insurance Options

Your alternatives for health insurance if you retire before age 65 might be as follows:

• Retirement insurance provided by your old employer
• Insurance via your spouse’s plan
• A government-run marketplace plan
• Up to 18 months of COBRA coverage

Individuals who retired at age 65 or older are eligible for Medicare coverage. If extra benefits, including a Medicare supplement plan or prescription medication plan are required, your wealth manager can assist you in making that decision. If you are retiring in another country, make sure you double check what Medicare will cover.

If you are a US veteran, the Veterans Benefit Administration may be able to provide you with health insurance coverage.

5. Develop a withdrawal strategy that is tax-efficient

Your financial planner will work with you to create a systematic withdrawal plan so that you may use your different accounts and supplementary sources of income, such as Social Security, to generate a monthly cashflow.

Two primary advantages of using a systematic approach are as follows:

• It can lower your risk of going over your budget in any given year, you may increase the likelihood that you will have sufficient resources to last the rest of your life.
• Winding down your funds in a tax-efficient and strategic approach will optimize the money available to cover your retirement.

Roth conversion is one of the tax-efficient method you may consider doing in your early retirement years. A Roth IRA conversion entails moving retirement savings from a 401(k) or traditional-style IRA into a Roth account. Considering Roth IRA payments are tax-free while traditional/rollover IRA payments are taxed, this can be favorable. It’s ideal to complete Roth conversions in years where your tax bracket is anticipated to be low because regular income tax must be paid with traditional/rollover IRA payouts.

If you are retiring in a foreign country, a Roth may do more harm than good depending on your situation and country of residence. Consult with a qualified cross-border financial planner to assist you in deciding if a Roth conversion is appropriate for you.