Rosalind Evans
As you approach retirement, it’s essential to navigate the transition smoothly. Understanding key financial steps can help ensure a comfortable and secure retirement. Susan Dziubinski from Morningstar discusses with Christine Benz, director of personal finance and retirement planning, the essential actions preretirees should take. Here are five critical steps to consider before you retire.
Step 1: Will You Be Working Past Retirement Age?
Determining your future work plans is crucial as you near retirement. “Several of the people I interviewed make the point that work is good for us because it oftentimes gives us a reason to get out of bed,” says Benz. Employment can provide not only financial benefits but also non-financial advantages, such as maintaining relationships and a sense of purpose. If you enjoy your work, consider how it can fit into your retirement plans. This might involve continuing to work part-time or finding meaningful volunteer opportunities.
Step 2: Planning for Social Security in Retirement
Social Security is a vital component of your retirement income. Benz emphasizes, “I see Social Security planning as a key component of the retirement income puzzle.” Before retiring, it’s essential to calculate how much you’ll receive from Social Security and when to start claiming it. Consider your individual situation, as claiming decisions can differ based on marital status and income levels. Utilizing tools like Mike Piper’s Open Social Security can help you make informed choices about your filing dates.
Step 3: What Is Your Retirement Income Style?
Understanding your retirement income style is critical for effective planning. Benz notes, “Wade Pfau and I talked about this kind of matrix that he’s created to help assess people’s attitudes toward retirement income.” Some individuals prefer stability, while others are comfortable with variability in their portfolio cash flows. By assessing your preferences, you can create a retirement income strategy that aligns with your comfort level and financial goals.
Step 4: Preretirees Should Practice Spending Their Retirement Savings
Transitioning from saving to spending can be challenging for many. Benz advises preretirees to practice spending from their portfolio. “Jamie Hopkins made the point that for people who are phasing into retirement that they should dabble in spending a little bit,” she explains. Try to take that dream vacation or treat yourself occasionally. This practice helps ease the discomfort of withdrawing funds from your savings when retirement begins.
Step 5: Prepare Your Portfolio for Retirement
Lastly, structuring your investment portfolio is vital as you near retirement. “You don’t want to wait until the very last minute to derisk because the climate might not be right for derisking,” warns Benz. Aim to have a mix of safer assets, such as cash and high-quality bonds, to safeguard against potential market downturns. By planning ahead and gradually adjusting your portfolio, you can reduce risk and ensure financial stability in your retirement years.
Preparing for retirement involves careful planning and consideration of various factors. By following these five critical steps, you can ensure a smoother transition into retirement. As Benz puts it, “There’s really a wealth of good useful information in here for preretirees and retirees.” Start implementing these strategies today to secure a financially stable and fulfilling retirement.
