Retiring in the Next Year: 5 Things to Tackle Before the Big Day

If you’re within a year of retiring, now is the time to address key areas to help ensure a smooth transition into this exciting new chapter. Here are five essential steps to consider. 

Article Overview

1. Assess Your Sources of Retirement Income
2. Build or Refine Your Budget
3. Review Healthcare, Long-Term Care Coverages
4. Establish and Build Up an Emergency Fund
5. Consult with a Financial Advisor

1. Assess Your Income Streams

As women prepare to enter retirement, the notion of income can be unsettling and anxiety-provoking.

Here are some things that aren’t uncommon for women to say or ask about this topic: 

• “Now that I’m retired, I need to be careful about how much I spend.” 
• “Am I going to run out of money in retirement?”
• “Can I afford this on a fixed income?” 

I’m going to push back for a moment on these doubts. 

Yes, it’s true that in your working years, you could potentially increase your income through a promotion, a new job, or an annual raise. But in reality, that income was relatively fixed, just like retirement. 

In fact, some retirement income, like Social Security and pensions, isn’t set in stone. Social Security has Cost of Living Adjustments (COLA) built in, and some pension plans apply a similar approach. 

Another part of pushing back on the limiting mindsets is better understanding the specifics of your income. Here are some key areas to think about: 

• Social Security: Determine the optimal time to begin benefits. Delaying until age 70 can increase your monthly benefit by 8% per year. Here’s a helpful chart from the Social Security Administration illustrating this. 
• Pensions and Annuities: Understand the payout options and timing. 
• Retirement Accounts: Plan for Required Minimum Distributions (RMDs) from Traditional IRAs and consider tax implications of how much you take and when.
• Part-Time Work or Consulting: Explore opportunities to supplement income if desired.

2. Build Out (or Refine) Your Budget

Many conversations leading into retirement (including this one!) focus on income. But this is a friendly reminder that your expenses are just as crucial in the great financial balancing act, as we wrote about in this piece on rethinking your retirement spending. 

I won’t go into the nuts and bolts of building a budget in this piece since we’ve already covered that topic in depth in this article. But here are three potential ways to create a budget you’ll actually love (okay, maybe not love, but one you like, at least): 

• Reverse budgeting: The concept here is that you plan how much you want to save, and then allot the rest of your spending from that new number. 
• The 50/30/20 rule: 50% of your money goes to life’s essentials, 30% goes to the “wants,” and 20% is allotted to savings. 
• Categorical budgeting: This is commonly how budgeting is thought of, a series of buckets for things like food, entertainment, personal care, and more.

No matter how you choose to budget, understanding your budget can help you overcome mindset traps like Bag Lady Syndrome, moving you to a place where you can enjoy the money you’ve worked so hard to earn.

P.S. – In retirement, you can certainly save money every month if you’d like. But in reality, the saving you’ve done your whole life was (mainly) intended for retirement. So there’s nothing wrong with axing the savings component of a budget and spending it. Consulting with a financial advisor (more on that ahead) can certainly help you align these two pieces of the equation. 

3. Review Healthcare & Long-Term Care Coverage

Healthcare is a significant concern for many retirees. It can also be quite expensive. 

According to data from Fidelity, an average 65-year-old may need $165,000 in after-tax savings to cover retirement health care expenses. That’s a lot of money. And it’s only the average. 

Things can become complicated when people retire before age 65. They don’t yet qualify for Medicare and may not have access to their previous employer-based health coverage. 

Here are some possible routes for those under 65: 

• COBRA: Temporary continuation of employer coverage. Keep in mind that COBRA coverage can be expensive. 
• Marketplace Insurance: Plans available through the Health Insurance Marketplace, www.healthcare.gov. 
• Spouse’s Employer Plan: If applicable, consider joining your spouse’s plan.

Once you turn 65, Medicare becomes primary. And, assuming you’re eligible, you have to use it. 

But you may need, or want, supplemental coverage (Medigap) or a Medicare Advantage (Part C) plan. 

While Medicare may seem straightforward in concept, government programs can involve technical paperwork, and it’s best to err on the side of caution. It doesn’t hurt to consult a professional to ensure you have your boxes checked. 

Research Coverage, Financing Options for Long-Term Care Possibilities

One of the most expensive aspects of healthcare in retirement is long-term care. And for women, this is an especially important potential piece of the healthcare equation. 

Women in the U.S. have longer life expectancies than men, and women make up a larger percentage of people in nursing homes and skilled nursing facilities — roughly 70% of residents, according to this data — in large part because they live longer. 

Even if you’re healthy as you embark on retirement, life is full of unknowns. You may experience unexpected health issues, or the ageing process may limit your ability to live independently. 

With that in mind, it’s crucial to plan for these potential expenses that result from longer life spans: 

• Long-Term Care Insurance: Purchasing at a younger age can reduce premiums.
• Hybrid Policies: Combine life insurance with long-term care benefits.
• Self-Funding: Set aside savings specifically for long-term care needs.

Some women may choose to tackle long-term care planning alone. But for those who don’t wish to solely shoulder that burden, there are legal professionals and financial advisors who can guide you through this long-term care process. 

4. Establish an Emergency Fund

Even in retirement, unexpected expenses can arise. Yes, your car may still break down even though you’re retired. Unfortunately, your car doesn’t know you’re care-free and no longer working. 

Women should aim to have three to six months’ worth of living expenses in a liquid, interest-bearing account. This fund provides a safety net and peace of mind.

5: Consult with a Financial Advisor

There are a lot of moving pieces as you close in on retirement, and many of them involve your money.  

For some, consulting with a financial advisor is about having a second set of eyes to vet their decisions. Others benefit from the consultation because of the added structure and expertise. 

Working with a financial advisor, especially one who focuses on serving women closing in on retirement like Pleasant Wealth, can provide personalized strategies to navigate retirement. 

Not only can a financial advisor assist in what we’ve already discussed, but they can help in many additional ways:

• Portfolio Diversification: Adjusting investments to align with retirement goals.
• Tax Planning: Minimizing tax liabilities through strategic withdrawals.
• Estate Planning: Ensuring your wishes are honored and assets are protected.

At Pleasant Wealth, we specialize in helping women achieve financial independence and joy in retirement. Our approach centers on building confidence, providing clarity, and creating ease in your financial journey.

What’s Next in Your Journey to Retirement?

Retirement is a significant milestone, and with thoughtful planning, it can be a fulfilling and joyful experience. By addressing these key areas, you can approach your retirement with confidence and clarity. 

If you would like and benefit from that guidance, feel free to reach out to Pleasant Wealth. You can schedule a complimentary introduction call here. 

We’re here to help you navigate this exciting transition.