You’ve finally reached the finish line. You’re getting ready to collect the gold watch.
Nearing the end of your working career is an exciting time. If you’re coming up on retirement, keep the following seven points in mind.
Once you retire, you might find it tougher to get credit than previously. Companies consider factors such as your income, housing expenses and payment history when deciding how much credit to extend. If you’re like most people, your income will drop significantly when you leave the workforce. Please ensure you have everything that you need before you cut the cord.
For example, perhaps you plan to retire in an RV and travel the country. If you want to finance your ride, a subprime score can mean paying more in interest. You might want to delay your departure from work date until you raise sufficient cash or pay down your outstanding debt.
Where do you plan to spend your golden years? If you intend on remaining in your familial home, you might want to make some accessibility upgrades. Even if you don’t need them right now, they could come in handy in the future.
Many people choose to downsize when they reach this life stage. If you plan on this route, get started early. Sort everything into three piles — to take, to sell or donate and to recycle. Give yourself at least 12 weeks, as you might need to go through belongings you’ve held onto for years.
If your spouse continues to work after you retire, you might find yourself picking up more of the household chores. Likewise, you might find yourself in line for a babysitting position if you have grandkids. You could even bring in extra money coaching your grandchildren’s soccer team.
Communicate your plans with your family members — remember, having you around more often might disrupt their schedules, too. Working out details and setting appropriate boundaries in advance spares future arguments.
You might be one of many retirees who decides to continue working part-time after retirement. If so, you should understand how your choices affect your Social Security benefits if you turn in your apron before you reach age 65.
Once you hit that age, there’s no limit on what you can earn. However, those under age 65 who make more than $1,580 per month will lose $1 in benefits for every $2 they earn over that figure.
When you retire, you’ll probably find a little less money in your wallet each week. However, you’ll also eliminate certain expenses. For example, you could save a small fortune in gas and vehicle wear and tear if you have a lengthy commute.
Sit down and make a new budget based on your post-retirement figures. Most banks today make this easier than ever by categorizing your expenses for you. Ensure you’ll feel comfortable with what you have to spend.
If you stowed away your acorns during your working career, you probably plan to live on more than Social Security alone after retirement. Meeting with your financial planner ensures the maximum money goes in your pocket or goes to causes you care about instead of ending up in Uncle Sam’s pocket.
For example, you can avoid paying taxes on your required minimum distributions (RMDs) from IRAs and 401ks by making a qualified charitable distribution. You can redirect up to $100,000 in RMDs to the charity of your choice, effectively lowering your adjusted gross income (AGI). While you can’t “double dip” and deduct these expenses on Schedule A, contributions you make outside of retirement funds still apply on that schedule, further reducing your tax burden.
Finally, your retirement is yet another new beginning. It marks the start of your time to do what you’d like. What are your plans for the next chapter?
Find ways to keep yourself active and involved with others. Loneliness increases all-cause mortality, but even those who live alone can avoid this effect by collaborating with others in their communities.
Planning for retirement is an exciting time. Keep these seven points in mind as your guide when plotting the course for your next life stage.