Is your planned retirement five to 10 years away? If so, you may want to consider taking the following steps between now and your retirement date.
Develop your retirement spending plan.
Start with your current spending plan.
- Mortgage or rent
- Debt payments
- Personal care
- Vehicle and home maintenance
- Subtract those expenses that will go away when you are retired.
- FICA taxes
- Retirement savings contributions
- Professional clothing or other items necessary for your employment.
- Commuting costs
- Business travel
- Add in those expenses that will be added when you are retired.
- Personal travel
- Eating out with friends
- Is your retirement spending plan reasonable or do you need to make adjustments?
Pay off all consumer debt.
Consumer debt is all debt besides your mortgage.
- Credit cards
- Student loans
- Vehicle loans
Assess your current home and pay off your mortgage.
- Can you see yourself living in your current home when you are 80 and have difficulty climbing stairs or doing the yard work?
- Would a smaller home and yard be better for you and more cost efficient?
- Not having the mortgage payment in retirement will free up dollars in your spending plan.
Have an emergency fund.
During your working years, it is beneficial to have an emergency fund equal to three to six months of your monthly expenditures.
Before retirement, you may want to increase the size of your emergency fund to 12 months or more of your monthly expenditures.
- If there is a downturn in the market, you can withdraw from this cash account rather than having to pull dollars from your retirement account.
- You can also use these funds for emergencies — those unexpected expenses like a hospital visit or a car accident.
Continue saving for retirement.
Take advantage of the catch-up provisions in the tax code that allow you to contribute more to your retirement accounts each year after age 50.
Check your expected Social Security benefits.
Create an account at www.ssa.gov/myaccount. You can find out your expected benefits at age 62, at your full retirement age, and at age 70.
Close the “Bank of Mom and Dad”.
68% of parents age 55 or older have provided financial assistance to their adult children, according to a Merrill Lynch study.
According to a BMO Harris Premier Services study:
- 50% of parents would delay their retirement to help their adult children.
- 25% would take on debt.
- 20% would take funds out of their retirement account.
Parents assume providing financial assistance will help their children become self-sufficient. Reality is that adult children can become dependent on their parents’ help and this can be detrimental to both the children and the parents. Parents may end up being dependent on their children if their retirement money runs out.
Need help preparing for retirement? Contact us: [email protected] or 402-502-0250.Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.