If you are looking forward to retiring early, you’re not alone. According to a report from ThinkAdvisor, 39 percent of Americans plan to retire before age 65.
Countless employees dream of leaving their jobs behind to enjoy the freedom of unstructured days. Before you pull the trigger on retirement, you’ll need to be mentally, emotionally and financially ready for the big day.
Here are a few preparation steps you should do before you kick off your golden years:
1. Check Your Life Insurance Policy
Some employers may provide life insurance as part of their overall benefits package. Once your retire, however, you may lose their coverage. So take the time to read your insurance policy to see if the insurer will cover you after retirement.
If this isn’t the case, consider purchasing a separate life insurance policy or negotiating with your employer on extending the coverage after you leave the organization. Life insurance is an excellent way for your beneficiaries to be able to pay major expenses, such as funeral costs after you pass away and mortgage.
2. Think About Your Housing Needs
Check if your current residential property is suitable for your golden years. Ask yourself these questions:
- Will you require assisted living in the future?
- Do you think you can get around your house easily as you age?
- Do you want to live closer to your friends and family?
- Will you be moving to a new city (or country)?
- Have you paid off your mortgage?
If you’re thinking of relocating to a new city that’s retiree-friendly or downsizing to a condo, you’ll want to make your move before you exit the workforce.
3. Plan Your Legacy
Planning your legacy is something that’s more for your family members than yourself. When you have a proper estate plan, you’ll have peace of mind knowing that your estate will go to the appropriate parties.
So, check if you need a trust or a will. Get in touch with an estate planning lawyer to talk about your options and come up with the necessary documents. Refrain from using online services, such as Legal Zoom, as they can potentially result in inadequate plans or missed signatures.
4. Save Money Diligently and Track Your Progress
Take advantage of any company that matches your 401(k). Once you’re in retirement, diversify your savings vehicles for tax purposes. Reach out to a trusted financial planner to help you make well-informed decisions on Roth versus traditional 401(k)s and individual retirement accounts (IRAs). Then, go with the best option for you.
Another important component in saving is not overspending. Make sure you are not throwing away hard-earned dollars on stuff that you don’t need. Chart your monthly household expenses and make a budget while you’re working to understand your spending behavior better. This will allow you to figure out your budget in retirement.
5. Create an Emergency Fund
Although a healthy retirement account is crucial, you should still build up an emergency fund. This fund should have a minimum of six months’ worth of income that can cover emergencies, pension delays, insurance and housing.
Take note that this type of fund is also important for early retirement. You won’t be able to access funds from a 401(k) or traditional IRA without a ten percent penalty until you’re 59 and a half years old.
6. Assess Your Overall Health Before Retiring
Before you exit the workforce, take advantage of your organization’s health care plan. Make sure you are up to date on oral care, hearing aids, prescriptions and annual medical check-ups.
Once you are retired, consult with your doctor every year (or as covered by your retirement health insurance plan). Keeping your physical and mental health in good shape is vital to achieving good quality of life. What’s more, it can help keep health care costs down. So, make sure that you ask your physician for suggestions on post-retirement nutrition, fitness and health.
7. Determine How You’ll Spend Your Free Time
Although the idea of having all the free time in the world may sound appealing at first glance, the reality might hit you hard once you find yourself in that situation. Jumping from a full-time work schedule to a complete lack of structure is difficult. This is why a lot of retirees fall into depression.
You can avoid this unfortunate fate by creating a plan to spending your newfound free time. Make sure that your activities align with your income and budget. If your savings can’t support your leisure plans, you’ll have to come up with alternative plans. Retirement can be a fulfilling and exciting period of life, so long as you prepare for it. Before leaving the workforce, make sure you do these seven key moves.