What Is the First Thing a person should do when they have decided to retire?
Never have I ever seen anything as difficult as the questions a lot of my baby boomer friends are asking. I thought that jobs, online or services could provide answers to these questions but apparently not. I even discovered recently that some baby boomers have never even saved for retirement. But my real question is once you know the date you will retire, what is the first step going forward?
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If I understand your question correctly you are asking what the first thing you should do when you decide to retire.
First thing is find out what your income will be in retirement. Next, figure out how much you will need to have as income in retirement. If the first is not equal to or less than the next, you cannot retire.
The first thing is you should join the AARP, of course! Second thing, hopefully preplanned, is what are you going to do with all your free time and how much discretionary income will you have? Most of us will have less $$ than when working, and may have to live at a simpler level.
My biggest tip is to have dinner parties at home with friends instead of meeting in restaurants. MUCH cheaper, probably healthier food, and you can chat as long as you like, with no waiter wanting you to pay up and leave.
I was forced into early retirement this year which caused great panic at first about my finances. I did receive a severance package where I received my normal paycheck for eight months after I left. Once I regained my composure, I immediately started living off of what my pension was going to be and putting the rest of my severance check in savings. What I found out was it wasn’t as hard as I thought it was going to be to cut back and live off of a little less income if you prepare ahead of time. I also had good bit of extra money in my savings account afterwards.
So my advice for soon to be retirees is to figure out what your retirement income will be (use an adviser if your not 100 percent sure) and start living off of that now. Put the rest in savings. This way you will find out if your going to be happy with that income. If not you can make adjustments now before it’s too late. Good luck and enjoy your retirement. It’s GREAT!
One would think that, but after 38 years on a job, I have found that no matter how qualified you are as a worker, when it comes to those of us who actually save for retirement, handling large sums of money becomes difficult and requires assistance way past what a lot of jobs are offering.
Often, people going into retirement do not realize how the federal tax structure will affect them. This is particularly true when RMD (required minimum distributions) kick in at age 70.5. This is money the goverment forces a person to withdraw from his or her retirement accounts which is then added to taxable income. The surprise is, this additional income can make most of social security benefits taxable, causing the tax rate to skyrocket.
So, I think an important thing to do when preparing for retirement or if retired and younger than 70.5 is to begin periodic conversions of money from trational IRA's to a Roth IRA. Yes, income taxes will have to be paid on the conversion amount, but tax rates are now lower than we'll probably ever see again and will be through 2025. Now is the time to convert funds to a Roth IRA in an amount that still falls within a lower tax bracket. Then, the RMD will be smaller and taxes will be less later on.
Of course finances are of the utmost importance in retirement as discussed by several others. But if you have your finances in order, then what? I think the most important thing is to find some meaningful activities, not just to occupy your time but to stimulate your mind and body. After doing my excercises each day and taking care of the house, I spend a lot of my time volunteering. I joined Peninsula Food Runners where I take leftover food donations from company lunches and deliver them to people in need. I also took up photography for which I never had enough time while I was working. I have a full calendar most days and love retirement.
For anyone who has recently retired or plans to retire in the very near future, I recommend that they plan to attend a financial planning workshop at a local community college so that they will learn all of the necessary things to get their financial affairs together & properly documented (ie. will, power of attorney, medical directive, update all beneficiaries on their insurance policies and monetary accounts, etc...). It is amazing that many people sometimes do not realize the importance of doing all of this or have severely outdated information (ie. addresses, beneficiaries, etc). It is important to do estate planning to ensure that all of your estate & assests go to who you want it to, otherwise the state will step in via probate and you will lose a significant amount of your estate & assets to lawyers and the state.
I had no intention of retiring at age 55, but my Dad was suffering dementia and I had a big decision to make, could I retire and take care of my Dad, or would he have to go to a home. Since he was still very cognizant at that time, I checked into the financial end of retiring. Being only 55, I was not eligible for Security or Medicare yet. I had savings bonds (Thank you, Dad, for advising me when I first started working to buy them!), had a good size savings account and being 55 and having worked for the company 35 years, was entitled to a pension. Of course, my Dad had Social Security and health insurance. My own insurance from the company would cost me though, most of my pension but I figured I could make it by watching what I spent. Our house was paid for, so all I had to be concerned about was the property taxes. The house was in my name because after my mother had died, the lawyer suggested that this happen, so if my Dad would have to go into a home, I would still have a place to live. My Dad lived 2-1/2 years and after his death, I was only 57, so still had 5 years before I could collection Social Security, My pension went for my health insurance (good thing I was very healthy). However, I was able to access my 40l k at 59-l/2 so after a couple of lean years,I was able to regain my footing. It was tough for a short time but the time I spent with my Dad was great and I was happy to be with him in his final years. My advice, make sure you have as many of your debts paid, a good saving account or IRA account to fall back on, as well as good health insurance!
In early 2012, I had a “small” stroke at age 69. I wasn’t in any way anticipating retirement - I had been healthy, absolutely loved my job & the people I worked with. However, after having my brain scrambled a bit, I started to realize that I couldn’t do my job so well anymore. I decided to apply for Social Security & used that tax free, additional income (I was past minimum retirement age) to pay off my bills, mostly credit card debt. I put the rest into savings. It wasn’t a lot of money but my SS income was just about equal to my wages so I could get along very nicely. In November, 2012 - I informed my employer of my plans to retire effective December 31st. We hired my replacement and as planned - I retired. By January, 2013 - I had packed up my few remaining household goods & moved to another state that had a MUCH lower cost of living. Six years later, I’m happily a lady of leisure, & content in retirement & fully recovered from the stroke. It’s not a fancy lifestyle but I pay all my bills & still have $$$ left over each month. I don’t need more than that.
All the other responses about paying off debt are awesome but the hardest thing I found (I retired 04/18) is the idle time. Things went South at work and I was just done. Every day I walked into my previous favorite job EVER was tense and anxiety filled so I put in my two weeks notice. I had never previously even taken a week's vaca so I spent three months pacing. Since then I have a few things I do for "pin money". Mowing the neighbors' lawns - I love yard work. Grooming dogs. Odds and ends. It's not that I NEED the money - it's more that I'm helping my elderly neighbors at a price they can afford and free if they cannot. I'm not a TV person but I love to read so I'm wandering through my book collection trying to weed out the ones I don't care for and donating them. The longer I'm "free" from work constraints, the more I find to do!
Do not think your question is difficult - just perhaps some people's understanding of same..! For myself, will have to figure out just how much the Social Security and pension will bring in, then "other expenses" previously covered by my employer (am a state employee whose healthcare was rather generously covered). So, taxes and healthcare are my concerns. Would like to get rid of certain debts (i.e. car, credit card, some tax liabilities) but would retire TODAY if possible. Am just SO very tired of being on everyone else's schedule, not my own....!
None of the affor mentioned services can answer those questions about retirement unless they have a time machine and can see the future. Sure having money for retirement is probably #1.Without it ,it will be a tough road. As to other things like the where will I live? What will my life be like? You can only presume and dream because life can alter all those dreams.There is the need to be realistic and flexible. initial planning as early as possible is important.
Will you have the same job in the future? If not ,will you need to reinvent yourself to go into your retirement? I lost a major job and reinvented myself 3 times. Health is a tough one. Will you and your spouse be healthy when you retire. This can seriously impact your living conditions. If you have children, how will they impact your lives? Are they going to wind up on your doorstep for a long term visit. What about the grandchildren, if any?
Where you live is interesting. For the first 30 yrs of our marriage we got transferred frequently so we never had roots in any community. But we did form opinions on places we would not want to retire to for the rest of our lives. Over the last 20 years we lived in one place in the upper midwest. Starting about 10 years before I acctually "retired" we decided a warmer climate might be best. So we traveled to various states where we might live and what it might cost to live there. The interesting thing is over the last 10 years,those previously desirable places have suffered from economic changes and climate change. Storms,hurricanes lousy winters and more rain and humidity. Also the politics of an area may affect your decision.
Five years before retirement my oldest daughter moved to the west coast close to where my brother in law lives. We thought it best to be closer to family for a variety of reasons. From multiple trips we found a very desirable area, very affordable and far enough away from family that we wouldnt encroach on each other. We downsized as there are only two of us.
Moving costs. Get rid of stuff. Who wants to pay for moving things you wont need. Sell and donate as much as you can.
So there is no one answer. Make a plan, but be felexible in your planning because things might change. Keep calm and carry on!
I especially agree with getting rid of stuff. Unfortunately, decades of various hobbies left us with huge houseful of stuff, from woodworking, beer making, canning, reloading, sewing; the list goes on and on. We pared back much of it, but still need it to enjoy our hobbies.
Start living on one paycheck a month (if you get paid twice a month). Bank the second check or pay off debt if you have any. This gives you an idea of what you need to cut back on in retirement. I did this for a year before I retired, so by the time I retired I was used to living on less and can honestly say I live well on my social security, pension and savings.
paid off our mortgage first, then the cars. We pay off credit cards every month as a rule, so those were the only Real Debts. As soon as I got the mortgage documents in the mail, I notified my boss. LOL
"...But my real question is once you know the date you will retire, what is the first step going forward?....".
I don't understand the question.
Is the date of retirement of one's own choosing? If so, a whole lot of prep work should have been done already to ensure a 'good' retirement. Or, is this a 'forced' retirement and the future retiree is suddenly faced with a number of decisions?
As a generalization, all boomers of 'sound mind' should have started retirement planning by their 30's. What kind of 'difficult questions' are your fellow boomers asking? "Steps forward" depends on what their current situation is financially, health-wise, family-wise, abode-wise, etc.
"...Why is everyone a victim? Take personal responsibility for your life..."