If you’re thinking about retiring this year, there are steps you can start carrying out before you step away from work. You’ll want to think through financial decisions and set up plans for the coming years. It can also be helpful to consider your priorities in retirement as you shift into this new phase.
Here’s what you can do if you aim to retire in 2023:
— Decide when to start Social Security.
— Sign up for Medicare or other health insurance.
— Check your retirement benefits.
— Take advantage of last-minute benefits at work.
— Consider rolling over your 401(k) to an IRA.
— Make a financial plan.
— Decide what to do next.
Decide When to Start Social Security
You’re eligible to claim Social Security payments beginning at age 62. However, you will receive a reduced payment unless you begin collecting benefits at your full retirement age, which varies depending on when you were born. For example, the full retirement age is 66 and 10 months for people born in 1959.
You can increase your monthly payments if you sign up for Social Security after your full retirement age. Each year you wait, your monthly benefit grows by about 8% up to age 70. You can create a my Social Security account to evaluate how retiring at different times could impact your monthly paycheck. “If you don’t need Social Security to cover expenses immediately, it is wise to wait and increase your monthly benefit, which will have a huge impact if you have a long life expectancy,” says Dennis De Kok, founder and senior wealth advisor at FCM Financial Planning in Grand Rapids, Michigan.
[READ: What Raising the Retirement Age to 70 Would Mean for Social Security]
Sign Up for Medicare or Other Health Insurance
Medicare coverage begins at age 65, regardless of your Social Security full retirement age. When you enroll in the program, you will need to make decisions about Medicare supplement plans and prescription drug coverage or Medicare Advantage plans.
If you retire before age 65, you’ll need to find how to get medical insurance until you are eligible for Medicare. You might qualify through a previous employer, professional group or your spouse’s health insurance plan (if they are still working). You can look at getting coverage through your state’s health insurance marketplace until you qualify for Medicare.
As you prepare your budget for medical care, keep in mind that you may need to spend more over time. “Retirement health care costs are one of the biggest expenses you will face,” says Brent Weiss, a financial planner and head of financial wellness at Facet in St. Petersburg, Florida.
If you don’t have a Health Savings Account (HSA), you could consider getting one. You can contribute to these with pretax dollars and you won’t pay taxes on the withdrawals if they are used for qualified medical expenses. You can also take out for nonmedical reasons after you turn 65.
Check Your Retirement Benefits
Check if you are eligible for a pension or other retirement benefits through your current job. Also, look to see if you qualify for benefits from a previous employer. You might collect income from two or three places where you worked during your career. You might be eligible for retiree employer-subsidized health insurance. Ask if retirees can take advantage of any other company-sponsored benefits, such as life insurance, membership to a health club or employee discounts on company products.
[READ: Companies With Great Retirement Plans.]
Take Advantage of Last-Minute Benefits at Work
If you have dental and vision coverage at work, you may want to visit the dentist and pick up a new pair of glasses before you retire. If the company matches any charitable giving, make your annual contributions before you retire. If your child has an employer-sponsored college scholarship, see if the scholarship will continue after you leave. You can look to see if you’ve reached your contribution limits in your retirement accounts. For 2023, you can save up to $30,000 in a 401(k) or a maximum of $7,000 in an IRA. “Now is the time to supercharge your savings,” Weiss says.
Consider Rolling Over Your 401(k) to an IRA
Employers typically allow you to keep your 401(k) account with the company after you retire. However, you might decide to transfer the funds to an IRA or Roth IRA. “IRAs typically have more investment options which allows you more flexibility and ability to further diversify your portfolio,” De Kok says.
If you own company stock, either inside or outside a retirement plan, now may be the time to sell some to diversify your holdings. You might also want to tweak your investment strategy and make a plan to minimize taxes as you draw down your retirement assets. “Approaching retirement means your investment priorities start to shift from growth to protecting what you have saved,” Weiss says. “Assess your overall level of risk to make sure you are comfortable with it.”
[Read: A Guide to Your IRA.]
Make a Financial Plan
Take time to draft a budget that outlines your expected income from Social Security, pensions, retirement savings, other investments and part-time work. Then estimate how much you’re going to spend. The amounts may have some flexibility, such as spending less by moving to a lower-cost community or putting more funds toward travel. An emergency fund will help you cover any unexpected costs like a car replacement or home repair.
Compare your income to the expenses to make sure you’re on track. “Identify any mismatches,” says Nate Johnson, director of financial planning and shareholder at Truepoint Wealth Counsel in Cincinnati.
Decide What to Do Next
Talk to others about what your retirement life will look like. Envision the activities and routines you’ll create. You might be thinking of moving to a new location, taking on a new hobby or spending more time with grandchildren. You might also map out ways to improve your wellbeing, such as cooking at home, getting enough rest and staying active. “If there are areas of your life where your satisfaction could be higher, think about ways you can fill that time with things you enjoy,” Johnson says. Finding something meaningful to do could help you feel motivated and engaged during the retirement years.
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How to Retire in 2023 originally appeared on usnews.com
Update 04/07/23: This story was published at an earlier date and has been updated with new information.
