Preparing for Retirement: Three Essential Steps to Take

Approaching retirement is a significant milestone that often fills us with excitement. However, ensuring we are fully prepared for this new chapter is crucial. Retirement planning goes beyond simply setting a retirement date and counting down the days. It involves careful consideration of various factors that will impact our financial security, lifestyle, and overall well-being during retirement. 

The decisions we make within the last three months leading up to retirement can profoundly impact the success and enjoyment of this phase of life.

If your retirement is near, here are three key actions you should consider taking within the next three months.

#1 Determine your estimated monthly Social Security benefit.

Social Security plays a crucial role in securing your retirement income, offering a steady source of funds. Knowing the amount you can expect to receive each month is essential.

Finding out your estimated monthly benefit is a straightforward process. Check your most recent earnings statement for this information. If you don’t have a copy readily available, register online with the Social Security Administration. Setting up an account is fast, and you’ll be able to view your records online afterward. If you intend to retire before turning 60, you might not have received a statement in the mail, as they are typically sent to individuals who are 60 years or older.

Before you can apply for Social Security benefits, you must reach the age of 62. Filing before your full retirement age will result in a reduced monthly benefit. Therefore, if you intend to retire at, let’s say, age 60, you will need to wait until you become eligible for these benefits.

#2 Develop a strategy for managing your retirement savings.

Hopefully, you have accumulated some savings to bring into retirement, whether it be $250,000 or $2 million. It is crucial to manage your nest egg wisely.

Establish a withdrawal strategy that outlines your retirement account withdrawals each year without depleting your savings. Additionally, ensure that your savings are appropriately invested for retirement. Depending on your current asset allocation, shifting towards slightly safer investments may be prudent if you have a heavy emphasis on stocks.

#3 Create a plan for healthcare coverage.

Many individuals receive health insurance through their employers. However, once you retire, this option may no longer be available, necessitating the need for a healthcare coverage plan and understanding its associated costs.

When you retire at 65 or older, you can enroll in Medicare immediately. However, if you are younger, you will need an alternative solution. This might involve joining your spouse’s plan if they are still employed and providing that option. Alternatively, you could consider purchasing COBRA coverage for a few months, which allows you to retain your previous workplace insurance. Although expensive, this option may be suitable if you retire at age 64 and only require temporary coverage until Medicare becomes available.

Regardless of your chosen approach, make sure you understand how you will obtain coverage and how it will impact your finances. Healthcare expenses tend to be a significant financial burden for retirees, so it is crucial to understand the costs you will face.

As the countdown to retirement begins, it is essential to approach this period with intention and focus. Addressing these key areas within the last three months can significantly contribute to a successful and fulfilling retirement. By securing our Social Security benefits, managing our retirement savings strategically, and planning for healthcare coverage, you can embark on this new chapter with confidence, knowing that you have laid a solid foundation for your future well-being.