Marking the halfway point of 2019 means new opportunities and new goals for 2020. For some of you, one of your goals might be entering retirement. It’s an exciting transition, but one that requires careful planning to ensure you’re prepared and will have a successful retirement.
If you’re aiming to retire in 2020, here’s what you need to know before you take that big step.
1. Your Retirement Income Plan Needs a Test Drive
If you’re getting close to retirement, you’ve likely thought through your monthly retirement income plan. To be confident that you can have the retirement lifestyle you want, test out your retirement income early.
For at least one month before you retire, stick to that retirement budget and see how it goes. If it’s not enough, talk to your financial advisor about possible adjustments you can make. If it’s more than enough, consider withdrawing only what you need from your investment accounts to keep your overall income in a lower tax bracket. By minimizing your Adjusted Gross Income (AGI), you could lower your Medicare premiums down the road, as well as your tax bill.
2. You Need to Plan for the Years Ahead
Your retirement income is different from your working income in a number of ways, but one of the biggest is that you get to decide how much you get paid each year and where that money comes from.
Take an inventory of all of your accounts and decide if your money is organized in a way that will help you make the most of your retirement. For example, with tax rates being the lowest we’ve seen in decades it might make sense to complete a Roth conversion on some of your traditional IRA income so that you’ll pay tax at a lower rate and help you avoid large required minimum distributions when you hit 70.5. This means you can keep more of your money for a long, happy retirement.
3. It Can Help to Create a Schedule
Retirement will be one of the biggest lifestyle transitions you’ll ever go through. Every day for the past 40 or so years, you’ve been an employee, employer or self-employed worker. Sometime in the next 12 months, those titles will disappear and you’ll have a nearly open schedule. As exciting as that may seem, all of that free time can also lead to isolation.
Plan out your days, especially for the first few months of your retirement. Whether that time will be spent watching the grand-kids, taking art classes, going on bike rides or traveling, try to have a few activities set up to do each week.
4. It’s Smart to Review Your Long-Term Plan With an Advisor
People are living longer than ever before, which means your retirement income needs to last longer, too. How will your money help you thrive every step of the way? If you don’t know the answer to that question, talk with your advisor. He or she can help you understand how the money you’ve been saving will translate into retirement income and help you feel confident in this next, exciting stage of your life.
This article was originally published on Dec. 2, 2018 in the Brainerd Dispatch.
Peg Chromy Webb has specialized in financial consulting for more than 30 years and is a popular co-host of the “Your Money” Radio Show. She is passionate about financial education and shares her expertise on career-building and financial literacy through various charitable endeavors.