Eight things to consider before you retireAdministrator
With many of our work force turning 65 each day, eyes are watching the sand in their job hourglasses drain. But before they can even think to accept their gold watch here are seven important things everyone should do in the months before they retire.
- Pay attention to all your savings.
This is a terrifying exercise. The fear is based on the myth that you should have enough money to never earn any income ever. Few people can actually retire and never earn any income because of the fact that people live that much longer. All that this does is a. to show you with how much you should subsidize your retirement income, and b. give you a good indication on the lifestyle you can afford to have. Do the calculations of how much you have for the rest of your projected life, or let someone help you with this. Take the taxman in consideration as well. Work on the average age of your parents.
- Decide on where you are going to live.
If you think you want to downsize and redirect some of your equity, it makes sense for a few reasons to do it before you stop working. For one, if you need a mortgage — no matter how small — it’s harder to get without a pay check, no matter how much you put down or what your loan-to-value ratio is. Lenders want to see that you have income. It’s also helpful to know just how much your home is worth in the current market, especially if part of your retirement plan is to live off some of the equity. But there is a larger question you need to figure out too: If you are taking money out of your home, where should it go? The short answer is — into something that earns money for you. Some people may want to use their home equity to start a business. Others may want to invest it in something that pays dividends. A word of caution, to sell your house and live at the sea where you have no family and friends is not a good idea. Life is made up of relationships. Live where the relationships are … that is your true wealth.
- Prepare your retirement assets for retirement.
When you retire your retirement assets will be invested in some sort of retirement vehicle such as a life or living annuity. You need to know that your principal is safe and that your money will last for as long as you do. If you are invested aggressively now move your pension money into money market account to avoid a possible dip in the market before you retire.
- Prepare an investment strategy for your assets.
Here you need to understand the concept of risk. Managing investments is actually all about managing risk. You still need the growth that equities provide, but who wants to be left holding an empty bag after the market dips? Your 60s aren’t the decade for taking a lot of financial risks because you don’t have a lot of working years left in which to recover from losses. Risk should be managed by a) having a well diversified portfolio, b) staggering your retirement by taking less early so that you can have more later on to live from and c) having a tax strategy.
- Figure out where your health coverage will come from.
This will be your biggest expenses and you don’t want to cut down here because you are entering the time of medical bills. See that you have a good medical plan. If you don’t have medical aid you will pay a lot of late joiner’s penalties. In that case you should consider medical insurance which has limited benefits but costs a lot less as well.
- Create a healthy lifestyle …. now.
Take those daily walks, eat healthy and see your doctor annually. This is not about living longer, it is about feeling great while living. Improving your health will also create a happier you. If you need better aids, for hearing or seeing; or you need a dental do-over. Doing this before you retire will also be important as you will still be on an employment sponsored medical aid.
- Begin the emotional shift before you leave.
Nobody likes to hear this, but a good part of our social lives are work-related. And once you are no longer part of the official office “family,” connections tend to drift away. You become less interested in office news and you all pretty much realize that the friendship existed primarily because your desks were near. When you retire, you will still need people in your life but it may not be the people you once worked with. Start building up your stable of non-work friends, preferably people who have their days available — because that’s the time you will need to fill. Check out Book clubs, jogging and bicycling groups, whatever your interests are. But you will need to replace not just the money but the socialization that came from going to a job everyday.
- Envision what your retirement day will look like.
Many people focus all their energy on figuring out how to afford retirement and don’t give a minute’s thought to what they will actually do once they retire. And to say, that you will keep busy is not enough. You must be busy in a meaningful way. Take 6 months holiday if you want the feeling of doing nothing, and then come back to living. Doing nothing is a recipe of depression. If you plan on volunteering, figure out where. If you think you want to teach some courses at the local college, make those connections now. If you are thinking it’d be fun to spend a few months in Costa Rica, learn where you will go and how much it will cost. Retirement can be an exciting time of new adventures. But it also can be lonely and boring. The difference is in the planning.