7 Things to Do if Retirement is in Your Near Future

One of the most important life events that people look forward to is retirement. In fact, there may not be any other event that takes literal decades of planning, preparing, and anticipating. So, if you’re on the brink of that achievement, advanced congratulations to you!

However, you need to be careful about the way you ride out these last few months/years to ensure that all your hard work up to this point doesn’t go to waste. There are a number of factors that may affect your retirement plans, be it economic crises or market volatility. Plus, you’ll probably go from having the financial flexibility to dealing with a fixed income and this can also present some challenges.

“Something that will surprise upcoming retirees is how long retirement actually is,” says Craig Cecilio, CEO, and founder of DiversyFund, a real estate investing platform based in the San Diego area.

Cecilio says that since people are living longer now, their retirement periods have also become longer. That’s why your retirement plans need to have a little wiggle room – so that you can make a few adjustments when unexpected factors tend to influence your lifestyle and assets. So, if retirement is in your near future, make sure to do these 7 things!

Review Your Financial Plan for Retirement

Before giving up the safety of a steady income, you should make sure your retirement plan is as rock-solid as you can make it. The first step, of course, is to make one.

“The first thing anyone needs to do before retiring is to devise a retirement plan that is tailored to their goals and factors in things like cost of living, medical expenses, and Social Security,” Cecilio says.

But if you already have a retirement plan, you should review it again to make sure that it is up-to-date with the latest market rates. “Revisit your retirement income plan to make sure your retirement income is enough to exceed expenses so that you do not risk having to unretire or, worse, run out of money,” says Beau Henderson, RICP, CLTC, founder of RichLife Advisors in Gainesville, Georgia.

Retirement planning can be a monumental task for some people – after all, not everyone is finance-savvy. That’s why Sharon Duncan, CFP with Selah Financial Services in Houston recommends hiring a financial planner. “You’re likely to be retired 20, 30, or more years. Inflation will make your cost of living go up, but your retirement income will probably not go up as fast,” she further added.

Making the wrong decision can prove to be catastrophic, therefore a specialist can help you plan for complicated things like Social Security, Medicare costs, investments, inflation, etc. You can find financial assistance according to what you can afford to spend.

Think About Your Purpose

While the financial aspect is a major part of retirement, it’s not all about that. As with every other event in our lives, we have our own hopes, dreams, and expectations about what it would be like.

“Retirement offers freedom and flexibility like never before. You can even change your purpose whenever you want,” says Duncan.

You may be looking forward to finding new interests, making new friends, or everyone’s favorite – traveling the world. Whatever it may be, it’s important to have something to look forward to every day so you don’t end up bored. “Find a purpose and live retirement intentionally. It improves your health, vitality, and happiness,” adds Duncan.

Pay Off Debts

Cecilio strongly recommends paying off any outstanding debts you may have before you enter retirement. For one, this will give you peace of mind so you can truly enjoy this time that you have worked so hard for. Not having to think about debt will help you relax and let you be more flexible financially.

However, more importantly, since debt payments cannot be put off, in case of a situation arising where your expenses have risen, you won’t be able to meet such obligations and this could result in things like late fees. In the worst-case scenario, you may have to come out of retirement – at least partially – to help pay off your remaining debt.

Plan for Market Changes

If 2021 taught us anything, it is that inflation can shoot up at any time possible. Those who don’t prepare for inflation will be shocked to find that the value of their money has gone down drastically at the time of retirement. While Social Security does increase payouts according to rising prices, it probably won’t be enough to maintain your lifestyle.

To protect against this, you need to build a financial plan that takes inflation into account. This will include things like growth assets and protecting your income and assets from the volatility of the market. The latter can be done by moving money around from high-risk investments like stocks to more reliable investments like high-yield savings accounts or short-term CDs.

“We can run retirement cash flow reports that will analyze the current income needs of the client and their available assets, and it projects forward 20-30 years with some reasonable growth assumptions for the investments,” says Ben Barzideh, ChFC, wealth advisor at Piershale Financial Group in Barrington, Illinois. “We can add a cost of living increase each year to their income and see how that would affect the long-term projections.”

Sort Out Healthcare

For someone who’s about to end the chapter of their life of working for someone else, health insurance costs may seem like a rude surprise.

“If you’re used to your company providing a few choices during open enrollment and then you’re done, you’ll find that health insurance requires more leg work during retirement,” Duncan says. “It’s not an impossible task, it’s just frustrating and time-consuming.”

Barzideh says that lots of people put off retirement until they’re old enough to be eligible for Medicare, but those who plan to retire earlier will have to find a cheaper alternative. This is not quite as easy to do and is one of the areas that a financial advisor can help you navigate with as little hassle as possible.

Get Used to the “Spending” Mentality

For most of us, we go through life prioritizing saving – as we should. However, when it comes time for retirement, it’s time for us to get rid of it and slowly shift to the spending mentality. After all, you’ve worked so hard to enjoy your retirement, and it’s finally time for you to do that!

“Up until retirement, we think spending what we have saved is ‘bad,’” says Duncan. “In retirement, it’s just the opposite. It’s actually OK to spend, and not save, during retirement.”

However, this can be easier said than done. “Although this seems simple enough, it is a hard emotional change for many people because we feel like we’re breaking the rules,” says Duncan. But she says most people get used to it within a few months. To get started, she suggests setting up a minimum spending budget, which may ease their conscience a bit to know that they can spend money and also have some money left over if they should need it.

Frequently Reevaluate Your Finances

In a perfect world, you would work hard up until retirement and then live off of your savings and investments comfortably for the rest of your life. Unfortunately, this isn’t a perfect world and you need to stay on top of your finances to make sure you don’t end up in a pinch.

The biggest upcoming change you’re going to be facing is relying on a fixed income. And that makes it more important to be aware of the changes in the market and laws that may affect that.

“Be proactive with your retirement and take it upon yourself to know what applies to you and your household in retirement,” says Henderson, pointing to potential changes in taxes, laws, and Social Security.

“When you know the rules you can put yourself in the best position possible,” he says. “The problem is that most people are passive in their retirement planning and only address issues after the fact, and that is where the major mistakes are made.”

This is another reason why a financial advisor, even a low-cost one can help you navigate things smoothly.