Be prepared for one of life's biggest changes

Preparation Steps to Take As You Close In on Retirement

by Dollar Stretcher Contributors

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Preparation Steps to Take as You Close In on Retirement

My husband and I are about three years from retiring. He will retire first and I will retire a year later. We've been so busy working and raising our kids (and sometimes our grandkids, too) that we haven't given much thought to retirement. What should we be doing now that will help us prepare for retirement? Are there some financial decisions that we should be making now? We haven't seriously considered downsizing, but I know that's an issue. Is there anything that we should be doing with Social Security or Medicare? I don't want to wake up three years from now and find out we missed some important decision points.

Do the Work and Then Relax

First, visit to learn more about benefits and rules. Then visit your local Social Security office to learn more about how to maximize your benefits. Delaying them if possible will make your later benefits higher.

But don't delay Medicare benefits, for which you should sign up six months before you turn 65. Also, sign up right away for Medicare Part D unless you choose a Medicare Advantage plan that includes prescriptions or have an employer-based insurance plan that will continue in retirement. Any delay will cost you money every month for the remainder of your life. You may also want to start researching Medicare supplement plans if you choose original Medicare.

Schedule an appointment with your investment broker to discuss how to maximize your retirement income and keep your investments on track. Retirement investing goals may be different from retirement savings goals.

I found downsizing a great help because it made my life easier to have less "stuff" and less to clean. This has made my life much easier and more relaxed.

Out of Debt Before Retiring

First and foremost, you should get out of debt completely. As for Social Security, you may or may not want to start it immediately upon retirement. If you don't, you'll need a pension and/or your own savings to live on until you do decide to start it. For Medicare, study up and decide whether you want to go the part C (Medicare Advantage) or B and supplement route. Part C is cheaper but severely limits the providers you can see. If you do not do part C, you can see any provider nationwide that accepts Medicare. Without Part C, you must sign up for a Part D (drugs) policy when you start Medicare. You also should sign up for a supplement. Initially, any insurance company must accept you. Any attempt to buy a supplement after initially starting Medicare is subject to denial for health reasons.
Jo Etta

One of the most important ingredients for a comfortable retirement is to be debt free when you retire. Will debt derail your retirement? This simple checklist can help you find out.

Convert to Roth IRA

If you have much money in a 401k, make sure you convert it to a Roth IRA if it is a "regular" IRA now. Otherwise, you will be taxed on the minimum withdrawal requirement when you reach 70 1/2. I didn't do that, so I suffer the consequences.

7 Retirement Prep Steps

I cannot tell from your question what you have already done. Therefore, I am going to assume that you are avidly pursuing self-education on both the financial and social aspects of retirement. You really cannot prepare too much!

For me, these things were very helpful.

  1. I paid off everything (I didn't owe anyone a dime).
  2. I started living on my retirement income years before I retired, using the book America's Cheapest Family. Subsequently, I was already prepared when my state agency cut staff by 30%, focusing on older employees to be retired or fired to cut expenses. I had planned to work 14 more years.
  3. I focused on saving at least 30% of that retirement income for unexpected expenses, house repairs, and car replacement, and putting all extra funds into my Roth account and a secondary emergency fund.
  4. I projected my expenses out for ten years and included inflation, using an inflation calculator. These calculations showed that I could not remain where I was in eight years, due to property taxes going up 10% a year and the HOA fee going up 5% a year with unexpected special assessments.
  5. I sold my condo and bought a house in a less expensive area, which I paid off and repaired from the condo sale funds, putting the excess into mutual funds (with Vanguard online). This allows me to be in control of expenses and repairs.
  6. Budget some money for hobbies and interests.
  7. Finally, I stay flexible and make cuts and adjustments as the need arises.

Have a great retirement!

Take the Next Step:

  • Does it seem like your finances keep getting more and more complicated? It seems that way because it's true. And that means that you need to keep things organized. Not only for yourself, but ultimately for your children. Our pre-retirement checklist will walk you through the steps you need to take.
  • Use this tool to maximize your retirement by determining the best age to take your Social Security benefits. Don't leave thousands on the table by taking Social Security at the wrong time.
  • Find tools and resources geared specifically for the 50+ crowd in The Dollar Stretcher section dedicated to your financial issues. If you're over 50, your financial needs are different. And so are your questions.
  • Subscribe to After 50 Finances. You've learned how to work smarter, not harder. This weekly newsletter is dedicated to people just like you. Subscribers get a FREE copy of our After 50 Finances Pre-Retirement Checklist, a list of everything you need to do to be ready for retirement.

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