5 Areas of Your Financial Life to Get Organized Before Retirement

5 Areas of Your Financial Life to Get Organized Before Retirement

The dream of retirement can be made a reality with a lot of careful planning and decision-making well before you actually plan to retire.

If you are seriously starting to think about your retirement plans, now is the time to start planning and organizing you financial life. Retirement is exciting and challenging at the same time. Making the decision on when you can retire, what retirement will be like and how you will live your life once you stop heading off to work every day takes some clear planning. Retiring is a big step, but the process doesn’t need to be intimidating.

There are several areas you need to focus on so you can retire to a comfortable and dignified life. Here are five of the areas you will want to pay particular attention to.

Monitor and trim unnecessary spending

Now is the time to adjust your spending to allow you to increase retirement savings to set up the lifestyle you want to maintain in retirement. Adjusting your spending can also allow you to more rapidly decrease any debt you have to allow you to enter retirement as close to debt free as possible. One area to consider is your home. Do you want to relocate when you retire or will you be better off downsizing your home to reduce or eliminate your mortgage? Creating a budget and tracking your expenses is also a great way to understand where you may be able to modify your spending and increase your savings.

Create a debt reduction plan

Look for ways to accelerate paying off your debts. In addition to allowing you to increase your savings, this will also allow you to reduce the amount of income you need to support you in retirement. Paying off debt is usually not something that can be done overnight, so creating a plan and sticking to it now will make it more likely you will be able to retire according to your timeline. There are many resources available to help you determine the best plan for you to become debt free as quickly as possible.

Make sure your investments are allocated for your goal

For many people, the retirement plan offered through their employer is the largest investment account they own. This is typically a 401k, 403b or 457, or similar plan for most people. While many people take advantage of these plans, it is not unusual to set up the plan and then forget about it. Review your employer retirement plan to make sure the investments in your account are allocated appropriately. Does the current allocation fit your goal risk tolerance and timeline? If not, make adjustments to get them into alignment.  Any investment and savings accounts you own should all be working together and viewed in total to ensure you are not taking on more risk than is appropriate and are working for you toward achieving your goal.

Review your health care options

Health care in retirement is one of the major items you will need to consider. Most people receive their health care benefits through their employer sponsored program. If you plan to remain working until age 65 you will probably plan to stay on an employer plan until then. If you plan to retire prior to age 65 you will need to research the options for obtaining an individual health insurance policy. Once you turn 65 you will be able to sign up for Medicare. Until then you may be able to use COBRA from your employer plan for up to 18 months after quitting your job. You will pay the full premium for the policy but this may be an option to get you to age 65 or at least closer to that age. You will also want to explore the Affordable Care Act state or federal marketplace options for a health plan to carry you until you reach age 65 and qualify for Medicare. Just be sure to explore these options and build them into your financial plan so you are prepared.

Define your new purpose

Many times this is a major challenge for someone who has spent their entire adult life committed to building a career and providing for a family. Your purpose may have been largely defined by the work you did and being a provider for a growing family. By the time you are ready to retire your family will most likely be self-dependent and your career will be behind you. For many of us our identity has been wrapped up in the work we do, so when that is finished, we need to find something else to takes its place. What will the next chapter of your life look like? Don’t wait until the retirement party is over to decide what you will occupy your time doing. Leisure time is great for a while, but most people find themselves looking for something else to do. Are you interested in a second career? What about getting involved in your community through charity work? Are you going to do a lot of traveling? Maybe a new hobby that you have been putting off is waiting for you. Whatever is right for you, start thinking about it now and creating a vision for your lifestyle in retirement.

Talking through these areas with a person you trust and who can help you build a plan for the future is a great way to help define what needs done and help ensure you are on track to achieve your retirement goal. Good luck!

Written by:  Dennis Kelley, Managing Partner

These are the opinions of Dennis Kelley and not necessarily those of Cambridge, are for information purposes only, and should not be construed or acted upon as individualized investment advice.  Investing involves risk.  Depending on the types of investments, there may be varying degrees of risk.  Investors should be prepared to bear loss, including total loss of principal.  The strategies discussed herein are not designed based on the individual needs of any one specific client or investor.  In other words, it is not a customized strategy designed on the specific financial circumstances of the client.  However, prior to opening an account, Cambridge will consult with you to determine if your financial objectives are appropriate for investing in the model.  You are also provided the opportunity to place reasonable restrictions on the securities held in your account.