Ten key steps to take before retiring – even if you’re on the Supreme Court
Supreme Court Justice Stephen Breyer announced his retirement on January 27, 2022, having served almost three decades on the Supreme Court. Appointed in 1994 by President Bill Clinton, Breyer – now 83 years old – has had an illustrious legal career.
While Justice Breyer’s retirement was formally announced in a letter released by the court and then in a White House event alongside President Biden, it makes one wonder about the other 10,000 people that will retire today to far less fanfare (currently, about 10,000 people turn 65 each day, the standard age for retirement).
Ten Pre-Retirement Steps to Take
If you’re one of the 10,000 people set to retire today or just thinking about when you can retire, you know that retirement takes a lot of planning and decades of preparation. You’ve gathered assets, set up a home and perhaps raised children. Retirement is the time to enjoy all you have achieved.
But as you move from the world of work into retirement, here are 10 key steps to take first. They are
- Prepare a budget that takes into consideration typical monthly costs and your plan for big potential expenses (e.g., travel, home renovations, moving).
- Meet with a financial planner to determine if you are really financially ready to retire. There are some financial advisors who offer consulting agreements (i.e., hourly rate) if you do not seek comprehensive wealth management services. Whether you want only investment advice or more comprehensive wealth management, a second opinion can help give you peace of mind. Research the advisor’s qualifications.
- Assess your emergency fund. For a working couple or a couple where one is working and one is retired, financial advisors typically suggest a fund of cash assets aimed to last 12 to 18 months. For a couple where both are retired, two full years of cash available to fund living expenses might be warranted. That helps you avoid having to sell investments to raise cash in a down market.
- Figure out what you will do for health insurance once you leave your job. Will you seek private insurance or do you qualify for Medicare (available once you turn 65)? Become well versed on your options and how to get benefits. Medicare does not include dental or vision coverage.
- Start considering where you want to live and whether downsizing – moving to a smaller home – is an appropriate option for you. Get your house appraised knowing that value could give you a sense of comfort. Most people’s largest investment is their home.
- Re-evaluate your estate planning documents and make sure they are in order.
- Examine your current risk management policies. Make sure you don’t let your insurance policies lapse. Weigh your needs and costs. If you work part-time or do consulting work during your retirement, check to see what potential liabilities you have and whether you can insure against them.
- Meet with your accountant to talk about estimated taxes in light of your retirement. What will be your expected new income bracket and how will that affect you?
- Before you leave your job, find out what sort of benefits in retirement your employer provides. Meet with your human resources manager to make sure you’re aware of all your options. Anything that could put more money in your pocket can be helpful as you shift to retirement.
- Decide on a Social Security strategy. You can start receiving reduced benefits at 62. You will get more by waiting until full retirement age. Did you now that about 1 out of every 3 65-year-olds today will live until at least age 90, and 1 out of 7 will live until at least age 95? Consider seeking professional assistance before you elect a benefit payout option.
Your Future Self Will Thank You
The struggle between your current and your future-retired-self presents financial advisors with their hardest problem. For your own well-being, favoring the future you is the best choice. Trouble is, this is very hard to do.
Your financial advisor can help.