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The Ultimate Checklist for a Relaxing Retired Life

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Thinking of retiring? But are you actually prepared for it? Some people think of retirement in terms of age, while others think in terms of financial goals. But one needs to be ready, financially as well as psychologically, to plan out every detail before making the move. The clearer your mindset, the easier it becomes to decide when to retire for good.

Retiring is a major step and can be wonderful for those who have planned it out well. So don’t bid farewell to your career until you have ticked the right boxes. Consider these signposts before calling it quits.

Ditch Your Debt Before Retiring

Taking debt into retirement is not wise. Even during one’s working days, being in debt can exhaust your savings. Hence, carrying debt into your retirement days when you are no longer earning a paycheck may further strain your financials. So, if you are approaching retirement, get serious about clearing your overdue payments, even if it means postponing your retirement or cutting down on extravagance.

Start with paying off unsecured debt, like student loan and mortgage amounts; these costly and least-beneficial debts should be cleared first. For instance, say you're carrying a mortgage at 5% interest, a student loan at 7% interest, and a credit card balance at 20% interest. In such a case, it’s prudent to clear debt with a 20% interest rate first. Of course, you don’t want to remain exposed to rising interest rates and late charges when you are living out your retirement days. Moreover, one should keep in mind that credit card debt should be paid off first, as the interest associated with it is not tax deductible.

Map Out Your Retirement Budget & Save Amply

First things first, work out details on how much money you will need to maintain your desired standard of living after retirement. Factor in essentials like housing, transportation, health, food, traveling and other leisure costs. While it is not easy to make specific calculations of these variables, there are guidelines like ‘Multiply by 25’ and the ‘4% Rule’ that will help determine how much you need to save for your retirement and how much you can spend each year.

To find out how much money you’ll need in retirement, multiply your expected annual expenses by 25.At this point, you only need to achieve a 4% return per year to cover your annual expenses in perpetuity.When it comes to annual withdrawals in retirement, the age-old tradition is to follow the 4% rule. Under this rule, if you withdraw 4% of your nest egg value in the first year, followed by inflation adjustments in the subsequent years, your savings stand a good chance of outliving you.The rule assumes a portfolio that consists of 50% in stocks and 50% in bonds. If followed accurately, proponents of this theory say there is a 90% chance your nest egg will last 30 years, which isn’t a bad proposition.

You can save for retirement through tax-advantaged instruments like 401(k)s and IRAs, as well as through stocks, bonds and ETFs. You also need to figure out how much you will receive in Social Security benefits. The only way to receive your full benefit amount is to claim at your full retirement age. Making claims earlier will result in a reduction in benefits.

Get Your Healthcare Costs Covered

Be prepared for potentially high healthcare costs in your retired years. While 90% of Americans rely on Medicare for their healthcare needs in retirement, it does not include things like long-term care, which is quite expensive. Moreover, one becomes eligible for Medicare only after 65years of age. It’s important to have enough money in reserve to meet unforeseen medical costs while maintaining everyday expenses. Set aside a certain amount each month in a health savings account, which provides tax benefits when used for medical expenses. Additionally, make sure you have health insurance along with long-term care insurance. Please note that the premiums of these will be cheaper if you buy these policies when you are relatively younger and healthier.

How to Retire Confidently

Last but not least, it’s important to be emotionally prepared before retiring. While the idea of retiring from a job that you abhor may excite you, if you are not ready for it psychologically, you might regret the decision later. Many individuals dread quitting jobs that have supported them for decades, fearing a loss of identity. Even if they are financially stable, they may choose to postpone their retirement as the idea of letting go of a routine lifestyle intimidates them. In that case, there’s no need to jump the gun if you have the option to continue working.

Also, a big part of retirement readiness is being able to answer the question: “Then what?” It becomes easier to confidently retire if you have figured out engaging ways to spend your time. If you don’t have broad interests and hobbies or if you are unsure of how you will end up utilizing the extra time, retirement is not likely to be a rewarding experience for you. Blurred outlines for your daily routine post-retirement can make you restless and jaded. Hence, proper planning of your post-retirement days is necessary to avoid the crippling feeling of purposelessness.

The Last Word

If you are on the fence about when to retire, there are a number of questions to be answered. So as you prepare to embrace this new phase of life, do consider the above checklist. Be financially secure and in the right frame of mind to ensure leisure and happiness in your golden years.

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