Retirement is a major step that requires careful planning and smart decision-making to be successful. You’ll need to be financially prepared to spend two or three decades without a regular paycheck. At the same time, you want to be flexible enough to tweak your plans if the need arises.
The planning part should begin when you’re young and just entering the workforce. But as you near retirement, you’ll need to narrow your focus to a few specific matters to ensure a smooth and successful transition.
If you plan to retire sometime in the near future — like next year — here are five things to do now before the end of 2024.
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Review Your Assets and Liabilities
When you are nearing retirement, it’s essential that you know exactly where you stand financially. This means having an accurate accounting of your assets and liabilities. Begin by reviewing all of your retirement savings accounts, including 401(k) plans, pensions and IRA plans.
Next, review other assets such as investments, real estate holdings, personal belongings and valuables. After that, add up all your debts. If you can afford it, hire a financial advisor to go over the numbers and help you develop a strategy for maximizing your assets and minimizing your debts.
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Make a Budget
Budgets take on added importance in retirement because many retirees live on fixed incomes. At the basic level, your budget should include how much money is coming in, how much it will take to attain your retirement goals and how much debt you have.
Joseph Patrick Roop, founder and president of Belmont Capital Advisors, said to put together both a monthly budget and annual budget.
“Sometimes folks forget the annual items like property tax,” Roop explained. “Also, have a written income plan identifying the income sources for your retirement.”
A general rule of thumb is that you’ll need 80% of your working income in retirement to maintain your standard of living, according to AARP. Social Security is only intended to replace about 40% of your earnings while working, which means you’ll need to get the other 40% from other sources.
Decide When You Want To Claim Social Security
You can claim Social Security benefits as early as age 62, but you’re almost always better off waiting until full retirement age or later because you’ll get a bigger monthly check throughout your retirement.
If you haven’t done so already, you need to set up a Social Security account. This will be your primary information source in terms of determining your expected benefits based on your work history, earnings record and when you want to start collecting benefits. Your 35 highest-earning years will determine your monthly payment.
Plan for Healthcare Costs
Getting older means running into more health problems — and the time to start preparing is right now. AARP recommends scheduling checkups and preventive exams before retiring so you can get a clear picture of your overall health and develop a plan to improve or maintain it.
Although Medicare plays a major role in retirement, it won’t cover everything, according to a blog post from Charles Schwab.
“Be sure to include the costs of premiums and out-of-pocket expenses in your retirement budget,” said Rob Williams, managing director of financial planning, retirement income and wealth management for the Schwab Center for Financial Research. “When Medicare kicks in at age 65, it’s reasonable to plan on spending about $450 to $850 a month.”
Come Up With a Tax Strategy
Taxes don’t go away just because you’re retired. You’ll have to pay taxes on retirement income — and one of your first decisions is deciding when to pay them. “Have a plan to pay them quarterly or have them taken out of your Social Security, IRA or pension income,” Roop said.
You should also strategize over the most efficient way to pay taxes so you don’t end up paying more than you have to.
“One approach is to spread your savings across a variety of accounts with different tax treatments — say, by saving in a pre-tax 401(k), after-tax Roth IRA, tax-advantaged HSA and a regular taxable brokerage account,” Williams said. “With this kind of tax diversification, you can mix and match withdrawals from your different accounts to better control your taxable income.”
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This article originally appeared on GOBankingRates.com: 5 Things Near-Retirees Need To Do Now Before 2024 Ends
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