5 Steps to Retiring with Confidence

by Jessica Sommerfield · 5 comments

Retired couple on cruise

The financial state of the Social Security Administration, as well as the uncertainty of the current U.S. and world economies, might be making you nervous about your upcoming retirement. Although some elements of retirement will always be a risk — since you can’t know the future state of economies, your lifespan, and other factors that can affect your finances — careful and thorough planning will carry you a long way in security for the future.

As you approach retirement, these steps will help you create a plan that’ll work for you:

1.  Start early.

Getting a head start is vital to effective retirement planning. Try to start planning as early as five years before you retire. Starting too early may cause inaccuracies in your finer calculations, but some steps can be done earlier than others. Hopefully, you already have a stable and profitable 401-K, or other investments, to draw from. If you don’t, start as soon as possible.

2. Work out the details of your retirement lifestyle.

This includes housing, medical needs, plans for travel, income sources, and other factors that’ll determine your budget. The kind of life you live now may be very different than the one you’ll live after retirement. Retirement living is typically much simpler — by necessity and also desire. However, this doesn’t necessarily mean you’ll need less income.

Although you may be spending less (or nothing) on housing and bills, traveling more and preparing fewer home-cooked meals will cause your discretionary spending to increase. You also need to consider your present health and how it may change in the coming years. While Medicare will most likely provide for many of your medical expenses, you may need supplemental sources. Evaluate your current spending patterns as a clue for your future spending, and along with your known expenses, create a tentative budget. If possible, consult an outside source for advice on whether your plan is realistic and sound.

 3.    Pay off as much debt as possible.

This is one of the simplest, but most crucial, steps when retirement planning. Paying off debt when you have higher income frees up more of your retirement income for necessary living expenses. If some debt can’t be avoided, such as a mortgage, pay off as much as possible and look into refinancing to get a lower interest rate for your remaining payment plan.

4.    Determine your best Social Security benefits enrollment age and ensure enrollment in Medicare programs.

This topic could be exhaustive, but in brief: the later you begin withdrawing from Social Security, the better. If possible, wait for your full retirement age, and even better, until you turn 70. The Social Security Administration’s website can help you calculate at which age you’ll receive the most benefits.

Medicare, the medical plan for Social Security, is very complex, and contains parts A, B, C, and D. Some parts will include automatic enrollment, while others require you to apply a few months before you begin withdrawing Social Security. Talk with a Medicare expert and follow the guidelines on when and what to enroll in.

5.    Update investments to avoid major losses close to retirement.

The younger you are when you start your investment plans, the more risk you can afford, which usually equals more profit. The closer you get to retirement, the more you’ll want to scale back on riskier investments and stick with those that’ll provide a stable and predictable income.

But, just because you’re retiring doesn’t mean you won’t need to continue to actively invest — especially with the uncertainty of Social Security income for future generations. The better your portfolio, the more chance you have of steady resources for years to come, so seek help from an experienced investor and/or retirement financial planner for even more security.

What would you add to this list? 

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  • marci357 says:

    Wow… Some inaccuracies here in my opinion….
    1. Learning to save for retirement starts when you are a kid… saving half of all gifts etc, into your piggy bank, and then into the bank. As soon as you get a real job, start the savings for retirement … compounded over the years it is the best gift you can give yourself.
    2. At least 10 years before retirement, start living that retirement frugal lifestyle.. It’s the only way you will get used to living on less and not going into shock when you do retire. All thru life be frugal and DIY whenever possible.
    3. Have NO debt upon retirement. Period. Including the mortgage – that’s why you start planning years and years ahead of time.
    4. On Soc.Security benefits… It takes YEARS to make up for the difference between taking retirement ASAP and waiting on it. You might not even live that long… do the math and see if waiting is even worth it. But HEALTH insurance is a problem … that you can not take early – so plan for that HUGE expense.
    5. Every one has their own risk level for investments – I have almost none…conservative from day one – less gained but NOTHING lost in those bad crashes – so to me it has been more than worth it…

    Retired at 55 – coaxed into working part time for same company- retired again at 57…. Just now 59…Will be taking Social Security Survivors’s Benefits at 60 … so had to plan for 3 years without Soc Security and a LOT of health insurance payments til 65… But it CAN be done ! BUT everything is paid for ! Including the houses ! THAT is the whole key!!!

    Best wishes !!!

  • Kate says:

    I lost all my “retirement money” in three separate stock market crashes. After that, I decided to spend the money and enjoy myself, and trust in God for my retirement. As far as starting to save when you are “young”, remember that what you think is a lot of money now will be chump change in fifty years. When I started saving for retirement, I earned $350 a month and $10,000 a year was middle management money. Today that’s way below the poverty line. My other recommendation is to simplify your life well before retirement, and you’ll discover you can live on a whole lot less than you think you can. Meanwhile, relax and have fun — make memories for the day it’s too dangerous to do or go where you went Way Back Then.

  • Jenny @ Frugal Guru Guide says:

    Start planning five years before??? More like 35…. That’s the point where you need to kill your debt, too.

  • Alex C says:

    I feel bad for the people who did not rebalance their portfolios as they became older. I have heard of countless stories about when the market crashed and people who were close to retirement had to end up working a few more years because they lost a lot of money.

    One of my favorite financial products that exist for lazy people, people who do not understand finances a whole lot and people who do not care to spend time investing is a lifecycle fund. Lifecycle funds may also be known as target date funds.

    The fund takes your current age and uses that to allocate the money into stocks, bonds and cash. Every year that you get older the portfolio readjusts itself without you even having to do anything. As you get older it will move more into bonds so that your assets become safe as you approach retirement

  • Jane Savers @ The Money Puzzle says:

    I would never be comfortable enough to enter retirement when I still had debt and I won’t even start aggressively saving for retirement until my debt is gone at age 50.

    I plan to take one of the Canadian government pensions that I am eligible to receive at age 60 and I hope to be able to invest in something safe, like a GIC (Canadian CD). I would receive larger monthly cheques if I waited until age 65 to start collecting but I think it will work out to more money in the long run by starting earlier.

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