·
Get a handle on your expected spending in
retirement.
·
Eliminate credit card debt and bring other debt
under control.
·
Educate yourself about when to claim Social
Security benefits (especially if you have a spouse).
·
Set and maintain a retirement spending rate
(withdrawal rate).
·
Plan for increased health care costs.
·
Plan to cope with market volatility.
·
Hire a fee only financial planner to help you
look at the whole picture if you are not comfortable doing it yourself.
These steps are as important today as they were in
2012. This posting is intended to expand
on some of the above and add a few more.I inadvertently omitted a very important tip from the original list, and that is to know what you will be doing in retirement. Today it is not unusual for people to spend 20 to 30 years or more in retirement. You should have specific ideas as to how you will spend your time in retirement before you stop working. Playing golf is not a reasonable plan unless you are a touring pro. The founder of a successful company that I used to work for told me that he planned to work as long as he could, and added that he would rather work than do anything else. To the best of my knowledge he is still working today in his eighties. If you are like him you should not plan to retire as you will never be as happy as you are working.
Most of us who do not
wish to work forever have other aspirations.
Whether it is charitable work, volunteering, starting a new business (a
different kind of work), taking up a hobby or writing a book, you need to make
a plan.
Books have been written about when and how to claim Social
Security benefits. It is common for
claimants not to understand the importance of knowing when and how to claim
especially if there is a spouse. Social
Security is a lifetime government pension and a very important component of
retirement planning. It provides a
lifetime income adjusted for inflation, and for many people their largest
source of income in retirement. Failure
to properly plan to maximize your lifetime Social Security benefits can result
in losing thousands of dollars for you and your spouse. Forget what you have heard about the program
going broke or being non-existent when you are ready to retire. Social Security will continue to be modified
to make it more financially stable with more means testing and other changes
(extension of retirement age, etc.), but will be there in some form for those
of us working today.
I am often asked if one should pay off his or her mortgage
prior to retiring. The short answer is
yes; however, it is not always possible.
You should not delay your retirement just to pay off a mortgage as there
are ways to retire and continue to carry a mortgage. One solution may be to refinance to lower
your costs or to shorten the remaining time on the mortgage. It may be possible to pay an extra amount
each month against the principal while you are working to shorten the life of
the mortgage without refinancing and incurring closing costs (see blog posting
of April 2, 2012: How to Reduce Interest
Costs and Pay Off Your Mortgage Faster).
Retirement planning is not something that can be done at the
last minute. Thinking about retirement
should start when you begin working, strange as it sounds, but that is when you
can begin implementing the most valuable planning tip of all:
“Start saving as much
as you can as early as you can.”
