You’re close enough to retirement that you’re already imagining days filled with golfing and grandchildren — but you’re not quite there yet. If you have about five more years before you want to retire, don’t assume that you’re done planning.
There are several actions you can take now to make sure your transition to retirement goes smoothly, and that your retirement itself is enjoyable and stress-free:
1. Reassess your financial readiness.
You may have been planning this retirement for years, but if anything has negatively affected your nest egg or savings strategy, it’s time to reassess. You need to decide now if you’ll need to work for a few more years past your original target date.
Now is a good time to meet with a certified financial planner to determine if you’ll have enough saved to retire. (If you don’t already have one, NAPFA is a great resource.)
2. Look into health care in retirement.
Gone are the days when retirees could count on their company’s medical insurance throughout their golden years. These days, if you retire before you’re eligible for Medicare, you’ll have to go through the private insurance market in order to stay insured — and those prices can be enough to give anyone a heart attack.
If you’re retiring before age 65 (when Medicare kicks in), talk to your employer about the possibility of buying into COBRA. While it’s not exactly cheap, you’re getting the advantage of the group rate, which means there are no exclusions and no age-based pricing policies.
3. Consider long-term care insurance.
The cost of long-term care can be staggering, whether you need in-home nursing or residence in a nursing home. While the cost of long-term care insurance goes up as you age — making it less of a no-brainer as you’re nearing retirement — it’s a good idea to look at the numbers and determine if you can fit the premiums into your budget now. Otherwise, you might exhaust your resources on long-term care and have to rely on Medicaid to take care of you.
4. Downsize.
Whether you’re still chipping away at your mortgage, or have completely paid off your house, now is a good time to start looking into smaller digs. Not only will you be able to tap the equity in your bigger home, but you may also be able to reduce your property tax burden and get settled in the area where you plan to retire.
5. Start the transition between working and retirement.
Retirees who have no particular hobby or retirement job planned are more likely to suffer from depression. It can be difficult to go from working to retired, particularly if you’ve always defined yourself by your profession. A great way to combat this issue is by getting involved in your retirement hobby or job before your last day. Build some relationships within your planned activities before you need them, and you’ll have a better time in the weeks and months that follow the end of your career.
Are you a few years away from retiring? What steps are you taking?
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My only concern is deciding where to live.
I don’t golf. No need to plan for that. + I only have one grandchild.
Cobra is not considered creditable coverage. Using cobra before starting Medicare may lead to delays, higher costs and possible penalties. Learn all you can about Medicare before you make retirement plans.
As one shift gradually from equity to debt, one should also pay attention to his/her own health.
Health is the one thing that can burn hole in the pocket big time.
Your suggestion on buying long term heath care insurance is a take away from this article for me
As for choosing a long-term plan, I would buy insurance from a young age. It is extremely difficult to buy insurance. Insurance groups also limit the sale of insurance to senior citizens like us.
In regards to downsizing, I believe its best to start doing this years prior and not immediately before you retire. You dont want to get stuck with a house that you can’t sell during retirement.
I am retiring this year; my efforts to save for retirement were trashed four times by stock market crashes, which does not mean I have no idea what I’ll do next. I am going to move into a senior residence that charges 30% of my gross monthly income, and that has a very good employee who scouts out all the benefits available for my age and condition. I have never owned anything I couldn’t abandon (except the cat, and she says I don’t own her), so downsizing moderately will not be difficult. My health is good save for congestive heart failure which at present is not handicapping me at all; I am an active member of the Catholic church, and I have plenty of hobbies and interests. I am better off than many retirees because I have few encumbrences and I’m ready to go when the vacancy light goes on. I don’t think a person ought to plan too much. God has a way of arranging these things to suit Himself.
I’m certainly not a financial planner, and I don’t play one on the Internet, but I would think that a person should look into long-term care insurance earlier than 5 years before retirement. I assume that long-term care insurance is the type of thing that becomes more expensive, the later-in-life that you buy it.
In other words, I would think that by purchasing it at a younger age, you can lock in a lower monthly/annual premium. (Of course, this would result in you paying into the insurance for a longer period of time … but the math may still work out in your favor. Plus, you’d benefit from the added years of coverage.)
It might make sense to reassess not just your health care, but your health in general. If you’d been planning to do lots of travel-hiking in your retirement but have developed hip problems that wouldn’t allow it, maybe some money should be shifted around.