Getting ready for retirement: 7 easy steps

Put these 7 steps on your checklist to meet retirement on full alert


Getting ready for retirement: 7 easy steps. Source:

Retirement brings out fears and confusion in many people. Besides the changes in daily routines, financial uncertainty may come. If you wish to look forward to your retirement with optimism and confidence, start preparing early.

1. Set your financial goals

Think about what you’re going to do when you retire. Perhaps, you’re planning to travel around the world or move to the countryside and dedicate your free time to gardening. The aims may be different so as the budgets you need to make them happen. Do a little preliminary research on how much your dream hobbies may cost you. Even if you don’t have a definite plan yet or don’t plan anything special, you’ll surely want to maintain the same level of comfort you’ve already got used to. Jobs may come and go, but most daily expenses remain the same. Therefore, your retirement income should be close to the pre-retirement salary. Let’s say, 70-80% of the typical income you earned before retirement would be enough to afford most of the amenities, products and services you prefer. Let this be your minimum basis and add up all the bonuses you have planned for your retirement time.

Projecting upcoming expenses for each of the next decades, make sure you don’t overlook irregular things and events. For instance, your house or a car may be in a good condition now, but at some point in time, you’ll need to do some repairs or renovations. Perhaps, you’ll even need to buy a new vehicle. Don’t forget about rising healthcare costs too. Some people who are not too superstitious even project their death-related costs (funeral, tombstone, etc) to not make it a financial burden for their family.

2. Explore your pension plan

In many countries like the USA or Canada, public sector workers and former employees of private firms receive pensions from different sources. In others, there’s a unified nationwide pension system. Whatever the case, you must find out what to expect before retirement. Some companies offer retirement savings plans, pension plans, or health plans to their employees as part of their employee benefits program in the US. Depending on the type of the plan, contributions can be made by both the plan sponsor and employees, plan sponsor alone, or employee alone. Talk to your employer about your retirement plan if you have one. Clarify its type if you don’t know it already.

Find out the approximate amount of your pension fund and regular payouts. Those can be based on the performance of investments within the plan or could have a predetermined amount.  Explore the ways you can maximise the retirement benefits. If you switched enterprises during your career, you may have to deal with a multi-employer pension plan. Or else, there may be a possibility to transfer your old pension to a new pension plan. You can discuss available options with a human resource representative or financial planner. If you’re going to receive a pension from the government or trade union, talk to the expert consultant to clarify the same details.

3. Think of retirement timing

In some cases, working after reaching your official retirement age is beneficial for you. Depending on your pension plan and the country you live in, your pension may gradually increase each month that you work over the state-defined retirement term. However, if you receive social security benefits and keep working, they may get reduced, depending on your income. Analyse your specific situation with the help of a financial advisor to decide when it will be best to finish your employment duties.

4. Start saving

Even with the most generous pension plan, you will need to have some extra savings. To begin with, emergencies always happen. Unexpected bills for your car or house repairs may undermine your thin retirement budget. Moreover, there may be delays in the start date of pensions or Social Security payments. The ideal scenario is to have a few months worth of living expenses stored in a checking or savings account with flexible withdrawal terms. To have this lump sum, you need to start saving early.

5. Invest

If you don’t want to have your spare money sitting idly in a checking account, you may keep them invested in a tax-advantaged retirement account. Keep in mind that various sources of retirement income are taxable as well as regular income. Others are either partially taxable or tax-free. Clarify the tax liabilities before opening any type of bank accounts to avoid an unpleasant surprise. If chosen wisely, retirement investment options can become a source of consistent income and make your retirement years very pleasant. Your investment portfolio must be properly diversified to sustain for a few decades at least. Remember that you’ll need to regularly withdraw some amount of earned money, so allocate your funds accordingly.

6. Prepare for rising healthcare costs

Most senior people experience more health issues when they retire. You should be prepared that your medical bills will eventually rise. Think about covering them beforehand. While some employers provide health insurance as part of the benefits program, you need to handle healthcare costs yourself when you retire. State insurance programs like Medicare in the US will likely be your option of choice. If you have no such programs in your country, explore private insurance options. It’s always better to pay regular insurance premiums and be sure that you’ll get appropriate medical help when needed rather than postponing your doctor consultations until you can scrape the necessary sum together. In many cases, healthcare timing is crucial for keeping you in good shape for years to come. Learn all about your medical insurance plan. Do some research to have the best coverage for you at a price you can afford. If you already have some chronic diseases or specific health conditions, make sure they’re included in the coverage. Put aside some money for the cases it may not cover like dental procedures, glasses, and contact lenses, etc.

7. Manage debts

You may not be obliged to pay out all your debts before you retire, but you need to thoroughly consider them. Keep in mind all your retirement plans, you may need to get a loan early to fulfil those goals. Banks may be reluctant to give loans or mortgages to retirees due to their lack of regular income. Hence, calculate any remaining mortgage balance at your planned retirement date. If needed, consider refinancing your mortgage when you’re still a part of the workforce, as getting approved may be easier with a constant job income. Your retirement assets may not qualify you to borrow as much.

Another good idea is to list things that have a significant monetary value that could be sold or liquidated if you were in a bad financial situation (art objects, collectables, furniture, property, vehicles). That will provide you with a clearer financial picture.


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