While some baby boomers have already retired, for many of us, retirement is still around the corner. We tend to spend a lot of time thinking about when to make that decision.
The Pew Research Center estimates that 10,000 baby boomers are expected to retire each day until 2030. If you’ve resolved that this is the year you are retiring, congrats. Those years of planning — and saving — have given you the confidence to move forward with an exciting time in your life.
Whether retirement is close or a bit further out on the horizon, consider these seven tips to ensure you are ready for retirement.
- Buckle down on a budget. A general spending guideline is fine when you’re years away from retirement, but now the rubber meets the road. It’s time to get serious about what your budget will be when you’re retired. Track your spending carefully and figure out which expenses you won’t have when you stop working and which expenses may increase throughout retirement. Look at your basic living expenses first and then your discretionary items. This will help you match your income sources to your spending needs and show where you may have room for adjustments down the road.
- Get cozy with your 401(k). For years, you’ve thought of your 401(k) as money you couldn’t touch, but now this will likely become a valuable source of funding for your retirement. If possible, have a talk with your company’s benefits team to see how you can access your money after you leave the company. You may be able to leave the money in the plan and make periodic withdrawals, or you might have to take all the money out at one time, which means you will probably be using a Rollover IRA. You’ll need to decide if you’re going to keep your retirement accounts as is or consolidate them to make things easier to manage.
- Location, location, location. Are you staying put in retirement or mulling a move? Do you and your partner feel the same way about it? I want to spend retirement on a sunny beach in Florida, but my husband wants to move to Canada and fish. Clearly, we’ve got some things to talk about! By now, you and your partner should have a shared vision for retirement. Don’t assume you have the same plan in mind if you haven’t discussed it. Whether you want to age in place, downsize or relocate, consider how your home equity may be part of your retirement plan.
- Be aware of age-related deadlines. Keep these milestone birthdays in mind:
- Age 50 (or older): You can make “catch-up” contributions to your 401(k) and IRA.
- Age 55 (or older): You can access money from your 401(k) penalty-free if you are age 55 or older and no longer working.
- Age 59½: You are eligible to make penalty-free withdrawals from your IRA.
- Age 65: Be sure to apply for Medicare, or you may be penalized.
- Age 70: If you haven’t claimed Social Security, it’s time to start, since your benefit isn’t going to increase from this point on.
- Age 70½: Begin taking withdrawals known as required minimum distributions (RMDs) from most retirement accounts.
If this seems like a lot of work just so you can stop working, it is! But retirement is a serious decision. You’ve worked and saved for this your whole life. Resolve to make it great.