It seemed so far away back when you were 21. – you even used a calculator to count the days and weeks until you’re retirement. Now you’re 60 and retirement is looming large on the horizon and you need to consider your financial moves.
According to U.S. Census Bureau data, the average American male retires at 65, while women retire at 63. Social Security pays full retirement benefits between ages 66 and 67 depending upon your month of birth.
Either way, if you’re five years out, it’s time to take one last long look at your situation and consider these financial moves to make just before you retire.
Bump Up Your Cash Reserve
A well-funded savings, checking and/or money market account of three to six months of living expenses will serve you well if there’s a lag between the time you apply and your first check arrives from Social Security, your IRAs and 401(k)s.
Of course, you should always have an emergency fund on hand anyway to deal with potential unforeseen situations. Congratulations if you’ve gotten this far without needing one, but you’ll definitely want to get it established now while you’re still earning.
Get a Feel for Your Cash Flow
Given you won’t be commuting back and forth to work anymore, your weekly expenses will drop somewhat. However, your entertainment costs are likely to go up a bit, as you’ll have more time to indulge your hobbies.
Take some time to calculate your income and compare it to your anticipated expenses so you make the adjustments needed to keep things flowing well. If the numbers aren’t adding up, you might decide to delay retirement a bit, or consider partial retirement to help close the gap.
Pay Off Debts
Going into retirement debt free has a number of distinct advantages. Chief among them is the fact you’ll be debt free! Seriously, though, your cash can be put to much better use than servicing debt once you’re no longer working.
A five-year window is enough to clear up a lot, even if you’re in a situation in which you’ll need professional help to make it happen. Pore over information such as these Freedom Debt Relief reviews before you make your decision to ensure you choose a reputable firm if you go that route.
Reduce Your Expenses
This one goes hand in hand with the one above. It’s time to eliminate waste. Do you really need the full-boat cable package? Streaming video is cheaper and offers more programming than you’ll ever be able to consume. Further, a digital antenna will get you all the local news and information you need.
Do you still need the four-bedroom house you bought when you were raising your family and claiming dependents on taxes? Downsizing into a condominium will cut your potential maintenance and utility costs considerably. Take a critical look at all of your expenses to decide what you can eliminate without disrupting the quality of your life drastically.
Review Your Tax Situation
You might find yourself facing capital gains penalties if you do sell that four-bedroom house. Liquidating your company stock might bring tax consequences as well. It is all too common for retirees to underestimate their tax burden.
Now is the time to get with your accountant to determine what moves you need to make to ensure you’re preserving as much of your cash as possible, while remaining in compliance with the law.
Adjust Your Investments
It’s coming up on time to shift your investment strategy away from growth and more toward income. This means reducing the volatility of your portfolio. Many people live anywhere from 20 to 30 years after retirement, so you’ll need to ensure your investments will carry you that far.
Get Long-Term Care Insurance
Estimates are that some 70 percent of Americans aged 65 or better will need some form of long-term care at some point. The need typically runs for approximately three years and the cost can decimate a spending plan. Long-term care insurance could save your nest egg should a protracted illness strike you or your life partner.
Addressing these financial moves to make just before you retire will set you on your journey into your golden years with a more secure income.