Retirement is the beginning of a new lifestyle that requires effort to cultivate. There are many things you can do before you leave your job to be more prepared for a successful retirement. Here are five ways to set yourself up for a fulfilling new adventure.
Try out different hobbies while you still have steady income. Don’t wait until you are retired to try out what you’ve always wanted to do. You never know how much an activity is going to cost until you get into it. I originally thought cycling wasn’t going to be that expensive, but then I found out that a quality bike costs much more than I thought it would. Then you have to buy a bunch of essential accessories, including a helmet and chain lubes, which could add up to hundreds of dollars. I really enjoy the sport, but I’m not sure I would have started if I was retired and hadn’t budgeted for the expenses. The beauty of still earning income is that if an activity turns out to be more expensive than you thought, then you can always delay your retirement date slightly to make up for the shortfall.
Make a to-do list for the year you retire. You will have a lot more time to think about what to do once you no longer have to sit in meetings all day. But the danger of not needing to wake up early is that you’ll start waking up later and later in the day. Then when you do wake up, you might spend too much time watching TV. Many people become less and less active once they no longer go to work. Don’t be one of them. The key to a healthy retirement is to stay active, so start your new life off right by knowing exactly what you would like to do after you leave your job.
Estimate your retirement expenses and check the number against your nest egg. Spend some time tracking your expenses before you retire so you can be certain that conservative withdrawals from your nest egg will cover your costs. Figure out an estimate as best you can, subtract all the guaranteed income you will get in retirement, such as a pension or Social Security, and then multiply that number by 25. If your nest egg is bigger than the resulting number, then you likely have enough money to withdraw approximately 4 percent of your portfolio each year, assuming you are willing to be flexible when the markets experience periodic downdrafts. Figuring out how much you need to retire is hard enough with factual data. Don’t make it even harder by failing to figure out how much you will need to spend in retirement.
Decide how you will turn your nest egg into an income stream. You’ve done the hard work of the accumulation phase, and managed to do enough saving and capture enough long-term investment growth to retire. But there’s still more to do. The water bill isn’t going to be paid by showing them your IRA statement. Now you need to decide the best ways to withdraw money from your nest egg to help your savings last the rest of your life. You need to turn the assets you own into cash in your bank account to pay the bills. Make a plan before you retire so you know exactly what to do. You will probably make suboptimal moves if you have to scramble for funds each month at the last minute.
Talk to those close to you about your plan to retire. You will naturally spend more time with your family members living in the same home when you retire. This can be a blessing, but it can also create new tensions. Try to address everyone’s concerns before emotions erupt. You will be around a lot more, which also impacts the routines of your spouse, children and other family members. Once you are sure you can cope with less income, make sure that those around you are comfortable with more of you and less money coming in as well.
This new phase of life can be the reward of your long hard career, but it can also turn out to be pretty miserable if you just let every day slip by you. Making the effort to plan your retirement can make the next part of your life less stressful and more pleasant.
David Ning is the founder of MoneyNing.com.
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What to Do 5 Years Before Retiring originally appeared on usnews.com
