Even though going from the workforce to retirement happens overnight, the transition between the two can and should take much longer to ensure that you have enough saved, a budget and a plan for the next 20+ years, and a plan for how you are going to spend that time. Retirement is a tricky beast, consisting of preparing your finances as well as preparing a new routine and the existential dilemma of what do you do with your life? Even though Savage Financial can’t help you create hobbies to enjoy during retirement, we will be there to help you create a solid financial strategy that will ease the stress of transitioning to retirement.

Basics of Transitioning to Retirement

  • Look at the big picture
  • Consider passive income
  • Think about investments
  • Create a long-term budget
  • Consolidate accounts
  • Consider medical needs
  • Take baby steps

Look at the Big Picture

When should you stop working? When should you start drawing from Social Security? Where will you retire? These are big-picture questions that will help get you started in the right direction. When you decide to retire has a big impact on your Social Security payments. If you own your home, this equity can help significantly if you ever want to move.

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Consider Passive Income

Having some income during retirement (but not too much) can help budgeting easier and less stressful. A passive income will bring in some money, but won’t require much work, if at all. A popular option is investing in real estate, but there are plenty of other smaller options, including renting a room in your home, renting any boats, RVs, or equipment that you may own, or you can even become a dog walker.

Think About Investments

Investments could be an entire blog series, so we won’t get too deep into this topic. However, you may want to look for low-risk investments, saving money and living off of the interest, and look at the value of your assets. In addition, you’ll want to make sure the investment will be able to keep up with inflation.

Create a Long-Term Budget

If you retire at 72 years old, but still live to be 92, that’s 20 years of managing the savings that you established during your working years. If you plan on buying a yacht, a second home, and living an extravagant life, your budget may need to stretch toward the end. Start planning now for any changes in your lifestyle or how you will be spending money, such as on healthcare or grandchildren’s college funds.

Consolidate Accounts

A part of transitioning to retirement is making your finances as easy to manage as possible. If you have an old 401(k) or an IRA, it can be harder to manage, and you’ll also be paying more in fees than you should be. Ask a retirement planner about fees, investment options, and how to avoid withdrawal penalties when rolling over these funds.

Consider Medical Needs

It is challenging to plan for things that you aren’t sure will happen or not, but in the case of a catastrophic event or if you need long-term health care, you’ll want to be as prepared as possible. While you may be able to rely on friends or kids for help, you should also have a solid financial health plan.

Take Baby Steps

Not sure where you want to retire to? Take a longer vacation to test out different areas, not sure about investing in real estate? Take a business class or attend a seminar to see what it’s all about. Think you want to take up painting during retirement? Sign up for a class. The longer you give yourself to think about your life during retirement, the more comfortable you will feel about the transition.

If you have any concerns, questions, or want help creating a financial strategy, contact the retirement planner Mike Savage at Savage Financial. Located in Pocono Summit, Mike has the experience and knowledge to help you through this exciting transition to retirement.