5 Steps To Take During the 4 Years Prior to Retirement
by Gary Foreman
Do you plan on retiring within the next four years? You could be overlooking something important. Here are some steps to take during the four years prior to retirement to help ensure your finances are as prepared to retire as you are.
You can almost see yourself retired! It’s nearly here! But, if you’re like most of us, you might have overlooked a thing or two. Have you left any of these steps undone?
1. Make Sure You’re Fully Prepared for Retirement
Retirement is different than anything you’ve experienced so far and it is critical to be prepared. In many ways you’re entering unfamiliar territory. Your happiness depends on what you know and what you do.
I’d like to tell you that if you do these few things that you’ll be fully prepared for retirement. But that would be a lie. There are several things you need to do. You don’t have to do them all at once but there are many different things to consider. Many only take a few minutes. But others do require that you make some informed decisions.
That’s why we’ve created a free pre-retirement checklist for you. We’ve tried to include all the things that can lead to a comfortable retirement. You can find the checklist here. It’s free and could make a big difference in your retired lifestyle.
2. Estimate Your Retirement Income
We all want to believe that our retirement finances will work out fine. Well, it’s just not true. Very few of us have saved enough for retirement.
Financial planners will tell you that by age 60 you should have 8 times your annual salary saved. Before you retire is the best time to estimate how much post-retirement income you’ll have. Most of us will have Social Security (more on that in a minute), perhaps a pension or retirement plan (401k, IRA, etc.), income from savings and perhaps a side-job. Take the time to total all your income sources and see how it compares to your current income. If it’s less than 80% of your current income you’ll probably struggle financially.
It could be a good time to start looking for an additional source of extra income before or after retirement. Perhaps consider starting a side gig for extra cash. See:
- Side Gigs That Make You Extra Cash
- 8 Easy Ways To Make Extra Money Without Working
- The Many Ways You Can Make an Extra Income
It’s tempting to think that we can sit back and everything’s going to be ok. The sad truth for most of us is that’s not true. We’re heading for a retirement where every dollar counts and we just won’t have enough for the lifestyle we imagined for years. It’s a shame. Because a little action now could make all the difference for years to come.
3. Reduce Debts Before You Retire
Many of us have been in debt for years and fully expect to die with a Mastercard balance. But if you think that debt is a drag while you’re working, try living with it after you retire.
Getting completely out of debt before you retire might not be possible. But reducing the amount you owe and the interest that you pay on it can make a big difference in your retirement lifestyle.
To help, we’ve created an ebook How to Conquer Debt No Matter How Much You Have. It gives you all the tools you need to make repaying debts as painless as possible. And it’s not a ‘one size fits all’ program. You’ll find resources for your specific situation.
4. Decide If You’ve Chosen the Best Time To Begin Taking Social Security
A common problem for retirees is that they begin taking Social Security too early. Each year you delay from age 62 to 70 your benefit increases by 8%. Take it too soon and your 50 years of payroll deductions produces a smaller check. Take it too late and you could die before you collect many of those bigger checks.
There’s a calculation that can help you figure out when to start collecting Social Security to maximize your benefits. You can find several online calculators that can help you crunch the numbers. Here are a few to try:
5. Learn All You Can About Retirement
We’re all aware that the world has gotten a lot more complicated in the last 50 years. Especially financial matters. So you need to regularly spend a little time to learn how these things affect you.
To help, we’ve created a free weekly newsletter After 50 Finances. You’ll get tips and advice not only about your finances and lifestyle, but how to help your elderly parents, adult children and grandkids, too.
Create a Better Retirement Right Now!
Like anything worthwhile in life retirement takes a little planning and effort. But the effort isn’t too big and the payoff can be wonderful! So why not make a small effort now to guarantee the retirement lifestyle that you’ve dreamed about for years?
- Expert Interview: Factors to Consider to Determine the Best Retirement Age for You
- Expert Interview: 2 Reasons To Collect Social Security Benefits as Soon as Possible
- Expert Interview: You Didn’t Save Enough for Retirement and You’re 55+
- Subscribe to After 50 Finances
Reviewed August 2023
About the Author
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.