3 things to do if you plan to retire this year

In light of the pandemic and recession, retiring in 2021 may seem more complicated than when you picked your retirement date all those years ago. But retiring comfortably this year is still possible, as long as you’ve made a solid financial plan that will get you through a few decades.

However, you can never be too careful in planning for your retirement, so before submitting your resignation, do the following three things to make sure you are financially ready.

Image source: Getty Images.

1. Review your retirement plan once more

Review your retirement plan and make sure you’ve saved enough. Your retirement goals may have changed over the years you worked, your investments may not have performed as well as you hoped, or you may not have saved as much as you wanted to. at some point. These things can mean that you are not yet ready to retire, even if you are ready to stop working. It’s best to know this up front so you can make adjustments, rather than trying to cope with the consequences later in your retirement.

Your retirement plan should include a rough estimate of what you will spend each year. Make sure that you are still happy with this amount. If you’ve spent a lot more than that in the past few years, it could be a sign that you’ll need a little more per year than you think.

Think about how you plan to spend your retirement. Your expenses might go down, but some people, especially those who plan to travel a lot, might spend about as much or maybe even a little more than they were used to, at least in the early years of retirement. Expenses usually decrease with age, and life slows down, unless you have significant medical bills.

If you are worried about not having enough money, you should delay retirement for a few months or years until you have saved enough. You can also try to contribute each month between now and your expected retirement date if you are only slightly out of the way. People under 50 can contribute up to $ 19,500 to a 401 (k) and $ 6,000 to an IRA in 2021, while anyone over 50 can contribute up to $ 26,000 and 7 $ 000, respectively.

2. Think before you start social security

You should have a plan for Social Security and now is the time to weigh all your options. The age at which you start benefits has a significant impact on the amount you will receive over the course of your life.

You must wait until the age of your full retirement (FRA) to benefit from all the benefits to which you are entitled according to your employment record. It’s 66 or 67 for workers today, depending on the year of birth. You can start at age 62, but you’ll only get 70% of your expected benefit by check if your FRA is 67, or 75% if it’s 66.

You can also defer benefits beyond your FRA, and your checks will gradually increase to 70, when you get 124% of your scheduled benefit if your FRA is 67, or 132% if it’s 66.

Delaying the benefits until your FRA or beyond is generally the smart game if you plan to live in your mid-80s or beyond.

If claiming Social Security is the only way you can afford to retire this year, and you’re willing to potentially cut your benefits for life, it might be worth starting Social Security as soon as you retire. Otherwise, you might want to keep working until you’ve saved enough to cover your expenses for a few years without Social Security. Then you can delay benefits until you qualify for larger checks.

3. Have a debt plan

It’s hard to predict how much debt you’ll be carrying in retirement if you’re decades away. This is especially true for high interest loans, like credit card debt.

As retirement approaches, it’s a little easier to understand. It is not impossible to retire with debt, but it can be risky. If you have a mortgage and you fall behind on your payments, you could lose your home. Credit card debt that gets out of hand could end up costing you more than you expected and draining your savings faster.

Before you retire, take stock of your debt and plan to get rid of it if you can. Try to pay off your high interest debt before retirement if possible. You can use a credit card with balance transfer to temporarily prevent your balance from growing, or take out a personal loan to have a predictable and more manageable payment in retirement.

You may be able to use your retirement savings to pay off debt, but you will have less money to keep you going through retirement. Try to avoid using your retirement savings for debt repayment if you can. Use the extra money you have or work a little longer to pay off your debt before retirement.

You are about to transition to life on a fixed income, and it is possible that everything will go very badly if you haven’t planned properly. If you’re not confident in your ability to comfortably retire right now, go back to the drawing board and play around with different scenarios to find out how much time you would have to work and how much you would need to save. to get the money you need.