It isn’t just the size of your nest egg that matters! Consider these things too before you retire.
If you’re planning to retire in the next couple of years, there are certain things that you should consider now if you want to enjoy a smooth transition into retirement. For starters, you can address your debts such as Credit Card dues, loan repayments, etc. The fewer bills you’ll have to pay in your golden years, the better your life will be.
Additional Reading: Why You Should Start Your Retirement Planning When You Are 30
Clearing your debts is just one among the many things that you should do at least a few years before your retirement. Also, it isn’t just the size of your nest egg that you should focus on. Here are a few must-do tasks that you’ll need to check off in a few years before you retire:
You, what’s the budget?
A post-retirement budget is very important if you don’t want to overspend in the early years of retirement. Also, retirement cuts down your income by a great margin, so you’ll have to adjust your lifestyle accordingly. So, how do you prepare your post-retirement budget?
First and foremost, you’ll have to decide how you are going to be spending your retirement days. Then determine your retirement income, the amount of money you’ll be withdrawing from your investments, and your pension. Based on this, you should work out a realistic (at least nearly realistic!) monthly budget. Do factor in periodic expenses like vacations, gifts, donations to charity, and emergencies too.
If you have trouble planning your budget, you can seek help from a financial planner.
Additional Reading: Retirement Planning For Everyone
Are you insured enough?
It’s important to do a comprehensive insurance review before you retire. Ensure that all your insurance policies have adequate coverage to match your to-be post-retirement lifestyle. Lack of sufficient coverage can lead to unexpectedly high costs that may force you into debt.
Also, remember that you’ll no longer be employed to avail medical coverage and medical reimbursements (for your small medical expenses), so you’ll need to anticipate the cost of healthcare and plan accordingly. Do not underestimate the cost of healthcare either else you’ll have to dig into your savings to cater to the expensive treatment/care bills.
If you haven’t yet insured your home, you might as well consider doing so. Your home is your biggest investment and the only way to keep it safe is by taking a decent Home Insurance cover to protect it.
Additional Reading: To Buy Home Insurance Or Not?
Are you ready for the rainy days?
No matter how well you’ve planned your finances, there are a few unexpected circumstances that can wreak havoc on them. It is always better to be prepared to tackle these situations, if they happen at all.
One of the best ways to beat emergencies is by boosting your cash reserve via an Emergency Fund. In case you haven’t yet got an emergency fund in place, you should start one immediately. You’ll need to put aside at least six months of your living expenses in this fund. Only then will you able to sail through contingency situations easily.
Also, since we are concentrating on rainy-day funds for your post-retirement days, ensure that you park these funds in flexible, easily-accessible investment options such as a Savings Account, an easily-breakable Fixed Deposit or a Liquid Fund.
Additional Reading: How To Build An Emergency Fund
Are your investments on the right track?
As you near retirement, it is necessary to revisit your investment strategy and make changes. Until now, you would have been open to risks and would have allocated your assets focussing more on the risky investments with high returns. Now it’s time to shift your strategy and focus more on the less risky avenues with medium returns.
For example, let’s assume that your current asset allocation includes 70% investment in stocks and Mutual Funds and 30% in debt funds. As you near retirement, you may want to invest more in debt funds and less in the high-risk avenues like stocks and equities (probably 80% debt funds and 20% equities).
The reason why we are suggesting that you shift to low-risk avenues is that after retirement you wouldn’t have the income (or energy) to cover up any losses your investments may suffer.
Estate planning is important!
Have you created your will yet? If not, then create one! If you already have one in place, now is the perfect time to review it.
It is extremely important to create a will if you want to protect your assets and your loved ones when you’re no longer around to do so. Besides, with a proper will, you will be able to quell any future family squabbles and be rest assured that your assets go to the designated heirs (and not any unintended beneficiaries).
Additional Reading: 5 Extremely Important Reasons To Consider Writing A Will
Travel to your heart’s content
Have you sacrificed your travel plans to make your career or to tend to family matters? Enough of sacrifices, buddy! Plan that long-awaited vacation, pack your bags and fly away.
We agree that after your retirement you’ll have a lot of free time to do whatever you want to, but travel is easier and cheaper when you’re younger. Besides, it is easier to bend in the plane’s seat, eat meals off schedule and run between terminals when you’re younger than older. Don’t you agree?
Additional Reading: 5 Amazing Ways You Can Use Your Credit Card To Travel On The Cheap
Home repairs, please!
Is your home in good condition? Check for any major and minor repairs that your house needs and get them done when you’re still earning. After your retirement, you’ll want to lead a comfortable life instead of running behind repairs, right? Also, you can start a sinking fund to take care of any repair expenses that may surface later.
Make the purchases
Planning to buy a new car or furniture or home appliances? Now is the right time to do so!
If you have a really old refrigerator or you want to bring home a new washing machine, it’s time you make these purchases while you’re still earning. After your retirement, without a steady flow of income, such purchases will be heavy on the pocket.
Additional Reading: Everything You Should Know About Consumer Durable Loans
Prepare yourself mentally
Retirement requires a lot of psychological adjustment. You need to prepare yourself mentally if you want the experience to be a good one. If you have chalked out a plan to manage your spending in your golden years and a proper budget, you’ll be able to easily make the transition.
Life after retirement can be a peaceful, fun-filled journey if you plan it well in advance. And if you want help to finance your small purchases, we will always be here to help you.