Retirement is a significant milestone and marks the transition from work to a freed-up schedule. If you plan to retire in 2024, a good starting point could be to lay out a road map. This typically includes thinking about where your income will come from, now that you won’t receive a salary.
As you prepare for this new phase in life, follow these guidelines:
— Review your financial situation.
— Create a retirement budget.
— Maximize your retirement savings.
— Pay off debt if possible.
— Explore Social Security options.
— Prepare for health care.
— Manage your investments.
— Decide on a location.
— Plan out your activities.
Review Your Financial Situation
Before making any retirement decisions, assess your current financial situation. Evaluate your savings, investments and retirement accounts to determine if you have enough funds to support yourself and your household in the years to come. You might set up an appointment with a financial advisor or sit down with your spouse to decide if it’s a good time financially to retire. While you may be eligible for Social Security benefits, the amount you receive may not be enough to cover all your expenses. Also, take into account that your retirement could last for several decades.
Create a Retirement Budget
“Review your spending now to get an idea of what it will look like in retirement,” said Michael Hoyle, a certified financial planner and private wealth advisor at Conrad Siegel in Harrisburg, Pennsylvania, in an email. Include living expenses such as housing, groceries, utilities, transportation and insurance. Think about how you’ll spend money in retirement, including financing extra items such as travel or a membership to a club. You might be able to reduce some expenses, such as shifting from two cars to one vehicle or purchasing less work attire.
Maximize Your Retirement Savings
Check the contribution limits and employer match if you have a 401(k) plan or IRA. In 2024, you can set aside up to $23,000 or $30,500 if you are 50 or older in a 401(k). An IRA’s contribution limit is $7,000 or $8,000 if you are at least 50. If you are able, you might put in as much as possible before retiring. Your employer could provide a match, depending on your workplace’s policies. You’ll have more funds set aside with the opportunity to grow during the coming years.
Pay Off Debt if Possible
See if you can pay off debts, including mortgages, credit card debt and auto loans, before retiring. Doing so will free up your financial obligations during retirement. You won’t have to worry about paying off balances or sending in a monthly payment. If you can’t get rid of all debt, set up a plan to pay it off as soon as possible.
Explore Social Security Options
Determine your full retirement age, which is typically between 66 and 67. If you apply for Social Security benefits when you reach your full retirement age, you’ll get your full benefit amount. You can begin receiving Social Security benefits as early as age 62, but the check you receive will be reduced. If you delay benefits past your full retirement age, you’ll get an increased monthly payment. You can apply for retirement benefits up to four months before you want to start receiving benefits.
“It’s important to determine when you want to start claiming Social Security benefits,” said John Bergquist, certified financial fiduciary and president of Elysium Financial in South Jordan, Utah, in an email. “You may also want to calculate how delaying can impact your monthly payouts.” If you don’t need the funds right away, or plan to pick up work in retirement, you might decide to wait to apply.
Prepare for Health Care
You’ll be eligible for Medicare at age 65 and must go through the enrollment process. You can sign up for Medicare three months before turning 65. If you’re not yet 65, you’ll want to look into other options for health care, such as getting coverage through a spouse’s plan. “If you have a health savings account, you might want to consider maximizing your contributions,” Bergquist said. This could boost the funds you have available for later health needs.
Manage Your Investments
Set aside some time to review how your investments are allocated. “How much exposure do you have to cash, bonds and stocks?” Hoyle said. Consider your risk tolerance level and make adjustments to align with what you’re comfortable with. You’ll want to review your portfolio regularly during retirement.
Also, set up a way to access funds. “Develop a tax-efficient distribution strategy for IRA and qualified assets to minimize tax implications,” said Stephen Roth, a certified financial planner and founder of Limestone Financial Group in Newark, New Jersey, in an email. When you take funds from an IRA or 401(k), you’ll have to pay taxes on the amount. If you’re in a lower tax bracket than during your working years, you could pay less in taxes. Or you might decide to take out a certain amount every year to remain in a lower tax bracket.
Decide on a Location
Downsizing could lower the costs you have for managing a home. If you sell your current place, you can buy another home with the proceeds. Simplifying your living arrangement could also mean less yardwork and fewer maintenance costs.
Look for communities with other retirees where you could make new connections. Or you could opt to move closer to family members. If you’re in an area where the cost of living is high, you might consider a state with cheaper housing and lower taxes.
[See: Best Places to Retire in the U.S. in 2024]
Plan Out Your Activities
Make sure you have some social engagement every week. “Shift the perspective of retirement from an expense to a period of reflection and enjoyment,” Roth said. You could try out new hobbies or volunteer in your community. You might meet regularly with your neighbors or see places you didn’t have time to visit before. Staying active could help improve your overall well-being in retirement.
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If You Want to Retire in 2024, Here’s What You Need to Prep Now originally appeared on usnews.com
