Readers Ask Their Questions: What Should I do to Prepare to Retire?

I’m about a year from retirement, have $700,000 saved, and am wondering what are some of the things I should do before I officially “hang it up?”

The first question to ask yourself is, “How do I plan on paying my bills after I retire?”

To get to that answer with any of our clients, we start by asking them to take a closer look at their personal balance sheet.

We met with a couple who had about $700,000 in IRAs, but we found out they carried some $350,000 in mortgage and credit card debt. They were set to liquidate their assets and pay off those debts, but that would have left them with only half of their savings to live on for the rest of their lives.

The first thing we set out to do was to advise them to restructure their debt. By paying off their credit card obligations first, and refinancing their mortgage for 30 years, they were able to cut their monthly expenses in half and put their savings to work gaining interest.

To answer this question for yourself, start with a financial inventory checklist:

  1. Know your net worth.

Beyond your $700,000 in retirement savings, determine the value of your other assets:

  • Real estate
  • Vehicles
  • Small business
  • Investments
  • Inheritance

Subtract the total of your liabilities, such as:

  • Mortgage
  • Student loans
  • Business loans
  • Credit cards

The total amount is your net worth.

If your liabilities are greater than your assets, your first priority should be to pay down your debt. Credit cards, mortgages, student loans add up to a small fortune in interest fees—that could otherwise be money in your pocket during retirement.

Not possible? Then restructure your debts to pay the least amount of interest fees. Limit credit card use to only when you can pay off the balance each time.

If the balance is in your favor, great! But remember, you have to make that number last for the rest of your life.

That’s why, no matter where you are, it’s good practice to rethink your budget.

  1. Guard your equity and slash your expenses. List the things that you hope to do in retirement in the “wants” column. Then list the things you cannot live without in the “needs” column. How does that stack up to your net worth? What costs can you cut or change or minimize?
  2. Calculate your retirement income needs in two categories: fixed expenses and flexible expenses. We encourage our clients to cover fixed expenses with fixed income. It can make a huge difference when it comes to optimizing cash flow and maximizing tax savings.
  3. Develop a sound health insurance strategy.Be realistic. Ensure that you have a plan that will cover your anticipated needs and provide you the access and care you need, should you need it.
  4. Finally, double-check your plan. Before “hanging it up” to enjoy the best years of your life, review your retirement plan.

I encourage you to do this exercise every year to maintain a handle on how you’re doing. Are you making financial progress or are you falling behind?

When it comes to making the best choices for maximizing your retirement, I recommend talking to experts you trust. The benefits of speaking with an experienced credentialed advisor can help add years of financial security to your golden years.