Nearing the end of your career can make you feel excited, relieved, and grateful but it can also lead to feelings of confusion, apprehension, and nervousness.

In this ultimate guide to retirement, we’ll go over all the important things to consider when nearing retirement.  

What does it mean to retire? 

For many, retirement is the light at the end of the tunnel after decades of hard work. Knowing how to prepare for retirement and what to do before you retire is incredibly important to have an easy transition that won’t cause you too much stress so that you can enjoy some hard-earned rest and relaxation. 

Retiring refers to when an older person stops working. Some people will continue to work at reduced hours or less demanding positions but many stop working altogether. Many people start seriously preparing for retirement at age 65 but everything varies based on personal preference and how ready the person feels they are to stop working. While you can do some preparations closer to getting ready to retire, retirement plans should start well before then.  

Part I: things to consider and review when planning for retirement 

If you are looking into retiring soon, there are many things you’ll want to consider. In Part I of this guide, we’ll go over the important things to consider and review as part of your retirement plan.  

Can you afford it?  

This is often the biggest question that comes to mind when people wonder if now is a good time to retire. How much money you’ll need to retire right depends largely on your standard of living and expenses. You’ll need to develop and review your budget to make sure you are financially prepared for retirement. These are the two main things to consider: 

  • Sources of income; 
  • Forecasted expenses. 

Make sure to calculate how much money you’ll have coming in from Social Security, pensions, retirement funds, and whatever other sources of income you’ll have during retirement. If the money coming in is enough to cover your forecasted expenses, then it could be a good time to start seriously planning for retirement.  

Make sure to calculate how much money you’ll have coming in from Social Security, pensions, retirement funds, and whatever other sources of income you’ll have during retirement.

What lifestyle do you want for retirement?  

Lifestyle for retirement is an important thing to consider. Are you a big spender that likes to travel and go out frequently? If so, you will need a larger budget for retirement. If you are looking forward to staying home more and keeping things simple, you won’t have to account for lavish vacations or other large expenses.  

Calculate your existing assets  

Many people have a hard time saving up enough money through cash alone. Cash savings and social security are fantastic ways to prepare for retirement but they are not always enough. Many people choose to invest their money into different assets to help prepare for retirement. Assets are anything you own that currently has value or provides future economic value. Here are some common examples of assets to consider: 

  • Houses and property; 
  • Cars; 
  • Boats; 
  • Art and collectibles. 

Calculating the values of your existing assets can give you a good idea of how much their value contributes to your savings. Knowing how much your existing assets are worth can help you come up with a plan in case you need to sell anything to reach your retirement savings goals.  

Come up with your financial plan  

Developing a financial plan for your retirement years is one of the most important things to do before retiring. A concrete financial plan can help account for whatever retirement scenarios may arise so that you are prepared. Make sure to account for all the money you have to develop a realistic retirement budget including: 

  • 401k; 
  • Bank accounts;
  • Savings; 
  • Investments; 
  • Assets; 
  • Social Security; 
  • Pension. 

These will help you understand how much money you have which is a very important factor when considering whether or not to retire. If you find that your calculations aren’t quite meeting your financial goals, it may be better to work on saving a bit more before retiring.  

Organize your debts 

If you are trying to figure out how to retire now-ish, you’ll need to organize your debts including: 

  • Loans;
  • Mortgages; 
  • Credit cards. 

You will need to continue paying these off if you decide to retire so make sure to factor them into your financial budget and plan. Calculate your payments and how long you will be paying off each of these debts to see how it will affect your overall budget for retirement.  

Understanding taxes in retirement

Income tax works differently for retirees. You’ll need to pay income tax on pensions and withdrawals from tax-deferred investments like IRAs, 401ks, and most other retirement plans. This is something you will need to factor into your budget as it will reduce your overall savings over time.  

If you are unsure how your retirement plan, pension, and retirement will affect your taxes, consult a tax expert or CPA as your taxes will be largely dependent on the specifics of your circumstances.  

How inflation can affect your savings 

Some things in life are out of your control like inflation. Inflation can affect your retirement savings negatively or positively over time.  

For example, if you have $1,000 in your savings account and it accrues 2% interest annually, you will have $1,020 in your account. However, if inflation is at 4%, you’ll need $1,040 for your savings to have the same worth as when you started. It may not seem like a lot but if inflation works against you over a long period, you will see the difference. There are a few ways to protect your savings against inflation including investing in commodities and stocks to diversify your assets and buffer your savings.  

How marital status impacts your retirement plan 

Marital status may impact your plans for retirement. It does not affect your social security benefits as these are based on your work records and earning history. It does make you and your spouse eligible for spousal and survivor benefits, though.  

It can also impact your 401k and similar retirement plans. All contributions to 401k before marriage will be considered as separate property but those made after your marriage will count as marital property. On the topic of marriage and retirement, it’s important to discuss retirement timelines with your spouse. In general, it’s best to stagger your retirements instead of doing it at the same time to help ease the overall transition for both of you.  

Do you have dependents? 

Part of your retirement plan and the decision should include whether or not you have any dependents. They will need to be accounted for in your retirement plan and budget. Dependents may also factor into your social security benefits. Spouses and dependents of working people may also be eligible while the covered worker is alive and after they pass.  

There are limits to how much a family can receive under social security so make sure to see how much your benefits will amount to and if they will meet the needs of you and your dependents.  

Knowing your health status and expected healthcare costs 

Healthcare is an important consideration for retirement. Knowing your overall health status can help you determine and estimate expected healthcare costs. Talk to your doctors to see what anticipated healthcare costs to expect so that you can factor them into your budget and decision about whether or not to retire.  

Expected healthcare costs can also help you make decisions about coverage and insurance. Having adequate coverage that helps to pay for anticipated procedures, surgeries, prescriptions, and other health-related expenses is paramount, especially as you age.  

Part II: decisions to make  

The next part of this retirement guide will educate you on important decisions you’ll need to make. Once you consider all the important factors involved in your retirement and whether or not it is a good time to retire you’ll need to make some big decisions to make sure you are well taken care of throughout your later years.  

When can you retire: early or late? 

Are you looking to retire soon or are you preparing for a few years down the line? Part of deciding when you can retire is how well-prepared you are. Do you have your financial plan figured out? Will you be claiming social security right away? These are all important factors in whether you can retire early or late.  

You can’t claim social security until you turn 62 but it is much better to wait until you reach full retirement age as you will receive your full benefits. Retiring early also means you have not had as much time to buffer your savings and prepare your investments and assets in a way that puts you in a position to retire strong.  

You will also have to figure out your healthcare if you plan on relying on Medicare for your insurance needs as you will not be eligible until you reach age 65. Make sure you have a plan to cover healthcare costs and insurance if you plan to retire early.  

When to start collecting Social Security Benefits 

Collecting social security is a great way to help cover expenses after retirement. You can claim Social Security Benefits at any age from 62 to 70. Claiming early means benefit reductions. Depending on your year of birth, you can experience benefits reductions between 25-30% if you retire at 62.  

If you can wait until full retirement age, it will make a significant difference in the long run. It can also be helpful to have savings set aside for the first few months of retirement so you don’t have to immediately start claiming social security benefits or withdrawals from pensions and retirement plans.  

Monthly benefits for those who start claiming at 70 are 76% higher than the amount they would have received at age 62. Claiming later is particularly attractive for married couples because the survivor’s benefit depends on when the higher earner claims. Working longer has three main effects:

  1. It can lead to a large increase in monthly Social Security benefits;
  2. It allows you to contribute more to your 401(k) and earn additional investment income; 
  3. It shortens the length of retirement, reducing the savings you will need to maintain your standard of living 

Medicare: when to enroll and which plan to choose 

Enrolling in Medicare is a great way to ensure that you have the coverage you need for your healthcare in retirement. The Initial Enrollment Period starts 3 months before you turn 65 and runs for the three months after. It is important to enroll during this 7-month period to make sure you don’t get penalized with fees or higher rates.  

Deciding which Medicare plan to choose involves knowing what each plan is for and whether Medicare will give you the coverage you need. Original Medicare includes Part A and Part B. Here’s what each plan covers: 

  • Part A covers healthcare needs like hospital stays, inpatient services, and skilled nursing facilities;  
  • Part B covers medical needs like medically-necessary services, some preventative services, and medical items;  
  • Part C is Medicare Advantage and covers everything that Part A and Part B cover plus additional benefits such as routine dental care, vision care, hearing care, and more.  
  • Part D covers prescription drug costs. 
Logo image

Medicare is as simple as you make it

We subtract the sales jargon and remove the confusion.

Shop MEDICARE online

Model image

The best time of year to retire

There are a few factors that influence the best time of year to retire. Some retirement plans calculate your benefits based on years of service from your first day of work. This means if you start May 2, 1985, and retire May 3, 2020, you may get an extra year of service according to your pension or retirement plan.  

In general, it is recommended to retire at the end of the year or the very beginning of the year to make it most advantageous from a tax perspective. This will ensure you receive any annual bonuses you are owed and also allow your income in the form of accrued vacation payouts. It is important to remember that this income may push you into a higher tax bracket so make sure to closely monitor your finances.  

In general, it is recommended to retire at the end of the year or the very beginning of the year to make it most advantageous from a tax perspective.

Where to retire

Deciding where you want to spend your retirement years is one of the more exciting decisions to make when the time to retire comes. Will you want to move to a different state or are you looking to be closer to children and grandchildren? Is there a place you’ve always wanted to live? These are exciting decisions to make and it is important to consider what will be the best option to make your retirement as enjoyable as possible.  

Think about potential downsizing 

As we age, we often realize that we don’t necessarily need that much to be happy and fulfilled. Oftentimes big houses or multiple cars end up being more of a burden than a gift. Downsizing is a great way to simplify your life and increase your savings in the process. Many people sell larger homes for smaller and more manageable homes as part of downsizing as they near retirement age.  

Downsizing will help you increase your savings and decrease the unnecessary assets and expenses that come with larger homes and extra vehicles.  

Work or no work in retirement? 

Some people are very excited at the prospect of not having to work another day after their retirement. However, many people worry about feeling directionless or bored without some form of work in their life. Think about your lifestyle and whether or not working part-time at a less demanding job will enrich your life through retirement. This will help keep income coming in. However, there are income limits for social security so make sure to balance the pros and cons of taking on a job and how it will affect your financial plan.

Developing non-financial goals for retirement 

Finances are undoubtedly an important aspect of retirement goals but they are not everything. It is also incredibly important to develop non-financial goals for retirement. This is your time to relax and enjoy your life. Make a list of the things outside of work that make you happy and see how you can incorporate them into your retirement. Here are some common examples of non-financial goals for retirees: 

  • Travel;  
  • Hobbies;
  • Time with children and grandchildren; 
  • Activities and social clubs. 

Now is the time to enjoy every day without the burdens and stress of your work. Set some goals to make the most of your hard-earned retirement.  

Part III: Planning for the big day 

Once you’ve gotten your financial and non-financial goals in order and decided on the best time for you to retire, it’s time to plan for your retirement announcement. This is the fun part! Getting to announce to your co-workers, friends, and family that you are making this life-changing decision is worthy of celebration. Here are some tips for planning for your retirement announcement.  

Handing in the notice at work 

Giving ample notice to your work is a great way to ensure the transition is smooth and cordial. Make sure to give lots of time to help your co-workers and employers adjust to your pending departure from the company. This allows them and you to train your replacement. Handing in the notice of your retirement also starts the conversation for your pension, annual bonus, accrued vacation, and any other loose ends before you retire.  

This is an official correspondence to your job so make sure it reflects that by including the right headers, appropriate information, and a professional tone.  

Farewell letter to employees 

Letting your employer know that you are leaving is important but it is also important to craft a farewell letter to your employees and co-workers. This helps to show your appreciation for the years you’ve worked together. It gives the opportunity to offer advice and guidance for the transition of your retirement.  

Make sure to keep things positive and avoid critical notes on fellow workers, the business, or the work itself. This can be done in an email. Make it hopeful by adding your goals for retirement and excitement for this next stage in your life.  

Retirement party 

Decide whether or not you want to plan your retirement party. Invite your friends, family, and co-workers to celebrate this momentous occasion and get this next chapter of your life started on a positive and supportive note. Here are some tips for planning a retirement party: 

  1. Come up with a budget for the party and stick to it;  
  2. Organize a guest list and send out invites;  
  3. Book a venue, catering, and any other amenities you’d like at your party.  

Following these tips will make your party a great celebration and a fun time to spend with loved ones to mark this life-changing occasion.  

Retirement speech 

Whether or not to give a retirement speech is completely up to you, but it can be a great way to share your feelings about this next chapter at your retirement party. Make your retirement speech your own! It helps to include these as a basic outline for your retirement speech: 

  • Keep it relatively short. As a guide, keep it under 10 minutes or so.  
  • Keep your audience in mind. Will you be talking mostly to friends or more professional co-workers? This will help set the tone.  
  • Make note of all that you have learned over the years and those who have helped you throughout your career.  
  • Acknowledge your accomplishments over the years and note the moments that were particularly memorable throughout your career.  
  • Without getting overly sentimental, make note of the things you will miss and what you are most looking forward to in retirement.  

Retirement trip 

Like a honeymoon, a retirement trip is a great way to recharge and mark this new chapter of your life. Taking a trip and traveling will help with the transition into a more laid-back and relaxed lifestyle in retirement. Pick a place that you’ve always wanted to go to and make it happen. Here are some tips for planning a retirement trip to mark the start of the next phase of your life: 

  • Come up with a budget;  
  • Plan early for transportation, airfare, lodging, and rentals;  
  • Research where you are going to get an idea of the culture and lifestyle;  
  • Consider all-in-one packages to make planning a breeze.  

To sum it up 

Retirement is an exciting and life-changing decision to make. It’s important to plan for both financial and non-financial goals throughout your retirement years. This means conducting a thorough inventory of your finances including debts, assets, accounts, etc. It also means looking into social security, Medicare, and healthcare needs. Knowing your finances is one of the most important factors to consider when deciding whether to retire.  

In addition to your financial goals, you’ll want to look forward to the best parts of retirement. Think about your travel plans, living arrangements, and all the other fun you have to look forward to during this next phase of your life.