Ray’s take: According to AARP, baby boomers are turning 65 at the rate of 10,000 per day. That means a lot of people are looking at the traditional retirement age coming up fast. Whenever you plan to not have to work anymore, there are some basic financial decisions you should make as you near that age.
The first thing to do is to take a look at your budget. In order to know your future cash flow needs, you need to know what they are currently. Don’t assume that number will be lower during retirement.
Looking at the bottom line of your 401(k) or IRA statement won’t give you the detail you need in order to plan. An itemized monthly budget will give you a much better grasp of expenses compared to what you can realistically draw from those accounts on a monthly basis.
Look into health insurance. If you are retiring before age 65, you will need coverage until Medicare kicks in. And you could still need health insurance even after age 65 because Medicare does not cover everything. This is an expense to include in your retirement cash flow analysis.
If you feel that refinancing your home is a solid financial move to make, do it before you retire. It’s much harder to refinance later. Creditors might be hesitant to provide loans to those who are living on retirement funds.
Make a decision about when you will begin drawing Social Security benefits. Smart use of funds from your retirement accounts can be one way to comfortably postpone the start of Social Security benefits. The longer you wait, the higher the amount you will receive. Further, the base upon which cost-of-living increases start matters a lot, particularly if you live longer than statistical life expectancy.
These are just a few of the things you need to consider before you make the transition from working to retirement. A financial planner or tax professional can assist you with making the best decisions for your future.
Dana’s take: Retirement is the rainbow at the end of long years of working and saving. But is there a pot of gold there? And how can we add to that pot of gold now? Which discretionary expenses can we cut at 40, 50 and 60 to help us live more comfortably in retirement?
I’ve been curious about the tiny house movement lately. If we only had one closet, imagine all the shopping we couldn’t do for shoes, clothes and home supplies. With all the big backyards in Memphis, could renting some of that land for a tiny house provide an income stream? Or for middle-aged renters, might a tiny house save on living expenses?
Think creatively now to fund your retirement dreams for tomorrow.