The last five years before you retire are the most critical in retirement planning.
It takes time to understand what you have and where it can take you. Many people wait until the last few months before retirement to plan. This can cause scrambling and last minute decisions. Michael H. Milarski, a partner and senior financial advisor with Signature Financial Planning advises people not to wait until the very last minute and to make sure they’re prepared.
Here are the five things he advises people to work on in the five years before retirement:
1-Forecast monthly expenses after retirement
Most everything costs money. It is important to estimate how much savings is needed by calculating monthly bills against your projected income. On top of that, you should also think about travel, hobbies, spending time with family, etc. All these things cost money and all these things need to be taken into account when planning your retirement.
Losing medical coverage later in life could be detrimental to one’s health. To avoid losing coverage, make sure there is no gap in between your retirement date and the time you become eligible for Medicare. If there is a gap, you will not be able to get health insurance until the annual open enrollment period.
3-Develop a plan for retirement income
Whether it is from your Social Security, pension, or retirement investment portfolio, you need to determine how you are going to fund your monthly expenses through your income sources. This income stream will last you the rest of your life.
4-Update estate documents
Protect your loved ones by preparing your estate documents for retirement. Updating documents will ensure your assets are passed on to the appropriate beneficiaries and that your medical care is carried out exactly as you wish. Schedule a meeting with your attorney to create and/or update these documents in the most tax-efficient way possible.
5-Consider your life insurance portfolio
Make sure your life insurance reflects who will rely on the income for support. Are your children still in school or have they graduated and started a family? If your children are grown, there may be less of a need to continue paying your life insurance premiums. Typically, retired individuals have little debt and have children that are on their own, so life insurance coverage may not be as big of a priority as it once was. Meet with an agent to make sure your portfolio is suitable for your current situation. If you find it is not, discuss other options and update accordingly.