7 Ways to Get Your Finances in Order Before Retiring

If you’re nearing retirement age, you’re probably starting to think about how you are going to spend your time and money now that you won’t be working full time. This could be all sorts of different ways depending on your interests, health, personality and financial means. Some people might want to continue working part-time while others may opt to travel or spend time with their families.

There’s no right or wrong way to go about retirement — but one thing you can do to ensure that you have peace of mind and pursue the goals you want to is to make sure you are making smart financial choices before you make the transition. From our pre-retirement checklist, here are seven ways you can start getting your finances in order before you retire.

Calculate Your Assets

One of the most important steps in our pre-retirement checklist, and one of the first steps toward planning a stable retirement, is to take a look at your assets. This includes the amount of savings you have accumulated, your retirement account and other cash you might have available, property you own, valuables, etc. Anything that you could liquidate, or turn into cash, during retirement, you can consider an asset. This gives you a baseline to understand how much you’ll have to stretch out over time.

Set a Budget

Take a look at the overall picture of how you would like retirement to look and start to estimate a budget based on the amount of years you are planning for, your current health, your annual expenses, emergency funds, etc. AARP recommends the conventional wisdom of saving $1 million to $1.5 million, or that your savings should amount to 10 to 12 times your current income. But the number will be different for everyone depending on where you live and how healthy you will be as you age. Spending generally doesn’t slow down in retirement so you want to make sure you have enough to cover your needs as long as you’ll be alive!

Scale Back On Stocks

Investments that provide guaranteed growth will be great for retirement. But risky stocks can take out years of income in a single day if you have a lot invested. Try to limit your stock exposure to around 50% once you hit your sixties so that you can focus on dependable growth instead of hoping for risky gains.

Meet With a Financial Planner

Unless you’re very well-versed in the stock market, it can be invaluable to meet with a financial planner who can help you guide your financial decisions going forward. They are skilled at navigating financial challenges and smart investments depending on your goals. You can discuss working toward a safe and stable financial future, dealing with unexpected expenses, saving toward a certain goal or where to invest your money.

Diversifying your portfolio is generally a good way to go about investments. This means creating an investment mix based on your goals, financial situation, risk tolerance and timeline, and using your money among different types of stocks, bonds and other investments to ensure that losses in one area don’t jeopardize the bulk of your savings.

Pay Off Debts

No pre-retirement checklist would be complete without covering debt. Before you retire, try your best to pay down your debts as much as possible. Start with debts that have the highest interest rates so you aren’t spending excess money without considerably lowering your debt. Minimizing the amount of bills you are responsible for can be a huge help in retirement.

Sort Out Your Health Insurance

How are you planning to pay for health insurance in retirement? Does your company offer retirees medical, long-term care and other insurance coverage? If you are under 65 and won’t get health insurance from your work, start comparing plans offered by the Affordable Care Act. Or you can use Cobra, where you can stay on an employer’s plan up to 18 months after leaving your job. You can sign up for Medicare up to three months before turning 65. But be sure to account for expenses that aren’t covered by Medicare, such as dental care and certain prescription drugs. You want to make sure you have access to quality health care and don’t end up with any exorbitant medical expenses that will eat into your savings.

Estate Planning

Last but not least, in the pre-retirement checklist is estate planning. Estate planning involves deciding how you would like your assets distributed after you die. It’s a good idea to work with a financial planner and lawyer on drawing up a plan because it can get a little complicated. An estate plan usually includes a will, a living will, assignment of power of attorney, a healthcare proxy and sometimes a trust.

You have the opportunity to name people who will receive your assets, including your investments, retirement accounts, insurance policies, real estate, business interests and valuable items. It’s a good idea to start your estate planning before your retirement so that you don’t leave any room for dispute in case anything happens to you. Be sure to revisit your plans every few years — major life changes, such as the birth of children, marriage or divorce, may occur that you will want to take into account in your will.

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Retirement is just like any other big life change — it requires planning and preparation in order to successfully pull it off. Start planning with a financial advisor now so you can learn as much as possible and be aware of all your options before deciding on a retirement plan that works for you.