Ready, Set, Retire: Prepare Your Finances for Retirement - Illinois Farm Bureau Partners Ready, Set, Retire: Prepare Your Finances for Retirement - Illinois Farm Bureau Partners

Ready, Set, Retire: Prepare Your Finances for Retirement

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Retirement Savings

Are you one of the millions of Americans getting ready to retire within the next five years? If so, you need to consider your financial readiness to retire.

Create a Retirement Budget:

Creating a preliminary retirement budget marks the first step in knowing whether you have the financial resources to retire. Many financial professionals use 75 percent of your after-tax income while working as a basic guide for a retirement spending goal, but this may differ substantially from your own needs.

Your lifestyle will be different in retirement than while you work. You need to start thinking about the lifestyle you want to have when you retire. Will you travel? Will you relocate to a new home? Whatever your retirement dreams are, you need to start planning.

You also should get an idea of what your everyday expenses will be. Work-related costs, such as commuting expenses and work clothing expenditures, will go down. However, other expenses, such as health care costs and leisure travel, may go up. If you expect to spend more time at home, your home utility expenses, such as electricity costs, may even increase. As you approach retirement, try putting your plan to the test by living on your retirement budget for three months to see where adjustments need to be made.

Assess Your Resources:

Once you know what you need and want to spend in retirement, take a look at the financial resources you will have in retirement. Get a projection of your Social Security retirement benefits for your target retirement date. If you will be receiving a pension, get detailed estimates of all your choices. Assess other sources of income that you may have, such as farm or business income or part-time work.

Next, take a look at all of your investment and retirement assets. You should review their allocations and develop a strategy for using them in retirement. You may want to get help from a financial professional to determine whether your income and assets can support your retirement spending, how to create a stream of income from your assets, and to decide the best time to file a claim for your Social Security benefits.

Take Care of Your Health:

Health care costs will be one of your biggest expenses in retirement. Before you retire, find out what health insurance options will be available to you. You’ll need to plan how you will be covered if you retire before age 65 when you will be eligible for Medicare. You should also take a look at how you will meet long-term care expenses if that becomes a future need.

Enjoy the Fruits of Your Labor:

If you do the necessary planning before you retire, you will be ready to enjoy your retirement. You will have peace of mind knowing you are financially ready to stop working.

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