The average American doesn’t give proper attention and consideration to retirement financial planning for a variety of reasons (excuses). Perhaps you don’t have time in your day-to-day life to squeeze in financial planning because it seems complicated and time consuming. Maybe you think it can be done next year; what’s the rush to do it this year? These attitudes, along with a lack of financial planning education, are part of the reason so many Americans are in a bad retirement situation. However, you don’t have to be one of those individuals. Summarized below are 10 of the most important steps you should be doing right now if you plan to retire within the next 10 years, according to Scott Spann, CFP (a.k.a The Money Doc).
- Write down your life goals, not just your retirement goals. Think about all areas of your life: family, career, social, health, personal, retirement. Set S.M.A.R.T goals – Specific, Measureable, Attainable, Realistic, Timely.
- Analyze your personal spending plan. There are many online budgeting tools available to analyze your spending such as Mint or Personal Capital. Take advantage of one if you have trouble managing your spending. Identify where your money is going and start to create a budget plan for retirement.
- Maximize your usage of tax advantaged accounts to maximize the value of retirement funds. Know the IRS contribution limits – $17,500 for 2014 ($23,000 for ages 50 and older). Consider investment alternatives: taxable brokerage accounts, buying property, etc.
- Run multiple retirement calculations. You will be surprised at how many free services there are, such as Google retirement calculations, to provide you with a ball park estimate on what your financial future will look like after you’re no longer working. Review your own calculations and retirement goals with a Certified Financial Planner.
- Review your health insurance coverage options. This is the number one concern for soon-to-be retirees. Health costs can make up a significant portion of the retirement budget.
- Consider obtaining long term care insurance. Main options: self-insure by padding your retirement budget, spend down assets to qualify for Medicaid, or purchase long-term care insurance.
- Have a plan to eliminate your remaining debt. Debt free is the best way to live in retirement.
- Re-Assess your tolerance for risk. As you age, your appetite for risk is bound to change. Think realistically about what you’re willing to do.
- Update your estate planning documents. Wills, durable power of attorney, health care power of attorney, and advanced health care directives are all things you should take time to put in place.
- Estimate your pension (if you have one) and Social Security income. Knowing your future streams of income will help you budget.
By Josh Mitchell