11 Key Financial Moves To Make Before You Retire

Retirement is a huge milestone, and preparing for it takes more than just saving money in a 401(k). The financial decisions you make before you retire can greatly impact how comfortable and secure your retirement years will be. To ensure you’re financially ready, here are eleven important financial moves to make before you retire. These moves can help you maximize your savings, reduce debt, and set yourself up for a more enjoyable retirement.

Start Saving Early (if You Haven’t Already)

The earlier you start saving for retirement, the better. If you’ve waited until your 40s or 50s to begin, you still have time to make an impact, but the earlier you start, the more time your money has to grow. The magic of compound interest works best when you give it time to grow. If you haven’t already, start contributing to retirement accounts like a 401(k) or an IRA to set yourself up for a comfortable future.

Max Out Your Retirement Contributions

Once you’ve started saving, it’s important to contribute as much as possible. If your employer offers a 401(k) match, take advantage of it. In 2023, you can contribute up to $22,500 annually to your 401(k), and an additional $7,500 if you’re 50 or older. Also, max out your IRA contributions. These contributions not only boost your retirement savings but also provide tax advantages.

Pay Off High-Interest Debt

Before you retire, focus on paying off high-interest debt, such as credit card balances or payday loans. The interest on this type of debt can quickly eat into your savings, so it’s important to pay it off as soon as possible. Paying off debt will free up more of your income in retirement and reduce financial stress. By eliminating high-interest debt, you can enter retirement with more financial freedom.

Build an Emergency Fund

An emergency fund is a must-have in retirement. Aim to save three to six months’ worth of living expenses in a liquid account that’s easily accessible. This fund will help you cover unexpected expenses without having to dip into your retirement savings. Whether it’s a medical emergency, home repairs, or an unforeseen expense, having an emergency fund ensures that you don’t have to rely on credit or risk draining your savings.

Plan for Health Care Costs

Healthcare costs are one of the biggest expenses in retirement. Even with Medicare, you may still have significant out-of-pocket costs for medical care, prescription drugs, and long-term care. It’s important to start planning for these costs early. Consider setting up a Health Savings Account (HSA) if you’re eligible. HSAs allow you to save for medical expenses with tax-free dollars, and the funds roll over year after year.

Diversify Your Investments

As you approach retirement, it’s important to have a diversified investment portfolio. A mix of stocks, bonds, and other assets can help reduce risk while still allowing for growth. As you near retirement, consider shifting to more stable investments, like bonds or dividend-paying stocks, to ensure you have less exposure to market volatility. A well-diversified portfolio provides security, especially during the years when you’ll be relying on your savings.

Estimate Your Retirement Income Needs

To ensure you have enough to live on in retirement, estimate how much income you’ll need. Take a look at your current living expenses and determine how much you expect to spend in retirement. Remember, your spending habits may change—you may spend more on travel or hobbies, or you may spend less on commuting or work clothes. Factor in these changes and consider how much income you’ll need from your retirement savings to cover those costs.

Know When to Start Taking Social Security

Deciding when to take Social Security benefits is one of the most important financial decisions you’ll make in retirement. You can start taking benefits as early as age 62, but waiting until your full retirement age (typically 66 or 67) or even age 70 can increase your monthly benefits. Evaluate your health, life expectancy, and retirement plans to decide the best time to start receiving benefits. Delaying Social Security could provide you with more financial security in the long run.

Consider Downsizing Your Home

Your home can be one of your largest expenses in retirement. If you’re living in a large home or paying high property taxes, it might make sense to downsize. Downsizing can free up extra cash for your retirement savings or reduce monthly expenses. A smaller, more affordable home can give you more financial flexibility and reduce the burden of home maintenance and utilities.

Review Your Insurance Coverage

As you approach retirement, it’s important to review your insurance policies, including life insurance, long-term care insurance, and homeowner’s insurance. Make sure you have adequate coverage that will protect your assets and provide for your loved ones. Long-term care insurance, in particular, is something many people overlook, but it can help cover the costs of assisted living or nursing home care if needed.

Build a Retirement Budget

Having a clear budget in retirement is essential. You’ll likely have a fixed income, so it’s important to plan out your spending carefully. Track your expenses and be realistic about how much you can afford to spend each month. Factor in essentials like housing, healthcare, and utilities, as well as discretionary expenses like travel and hobbies. A solid retirement budget will give you peace of mind and help you live comfortably within your means.

Work with a Financial Advisor

If you haven’t already, it’s a good idea to work with a financial advisor to plan for your retirement. A financial advisor can help you create a retirement strategy, evaluate your savings, and determine the best ways to draw from your investments in retirement. They can also help with tax planning, asset allocation, and risk management, ensuring that your financial plan is as efficient as possible.

Start Planning for the Lifestyle You Want

Retirement is not just about having enough money—it’s about living the life you want. Think about how you want to spend your time in retirement. Do you want to travel, start a new hobby, or volunteer? Make sure your financial plan supports the lifestyle you envision. Retirement planning should include both your financial goals and your personal aspirations, so you can enjoy your retirement years to the fullest.

Prepare for a Secure Retirement

By making these key financial moves before you retire, you can set yourself up for a more comfortable and secure future. While retirement may seem far off, taking steps now can ensure that you’re financially prepared when the time comes. Planning ahead means less worry down the road and more time to enjoy the fruits of your labor.

10 Sneaky Expenses Keeping You from Reaching Your Financial Goals

Managing money isn’t easy, and hidden costs can easily derail progress. It’s not just big-ticket purchases that hurt your savings; small, sneaky expenses often fly under the radar. Identifying and addressing these expenditures can dramatically improve your financial health. Here are ten common culprits that could be blocking your financial goals. 10 Sneaky Expenses Keeping You from Reaching Your Financial Goals