As you approach retirement, you’re entering one of life’s most exciting chapters—one that promises new opportunities, more freedom, and a chance to enjoy the fruits of your hard work. But along with the excitement, there’s often a sense of apprehension about your financial future. After all, retirement should be a time when you don’t have to worry about money—when your finances are in a strong enough position to support the lifestyle you want.
To help you prepare for this new phase, we’ve outlined 10 essential steps to improve your financial health and set yourself up for a successful retirement. These simple actions can help you feel more confident and in control as you make the most of your retirement years.
1. Estimate Your Retirement Budget
Creating a budget for your retirement is the first step toward ensuring your financial health. It’s not just about listing your expected income and expenses—this is about planning for the lifestyle you want. Do you plan to travel more? Or maybe downsize your home? Your budget should reflect those goals, whether that means saving for trips, a second home, or extra time with loved ones. The more specific you are about your retirement goals, the better you can prepare for the reality of funding them.
A comprehensive budget will help you track daily expenses while ensuring you have enough savings to live comfortably throughout your retirement. A well-structured budget becomes your guide, so you can stay on track without running into surprises.
2. Track Your Spending
It might sound tedious, but tracking your spending is a vital part of managing your finances—especially as you head into retirement. By understanding where your money is going, you’ll have a clearer picture of how much you can save and spend comfortably.
There are plenty of tools available—budgeting apps, spreadsheets, or even financial software—that make it easier than ever to stay on top of your expenses. Regularly reviewing your spending can reveal areas where you can cut back or adjust to better align with your savings goals and life priorities.
3. Create a Plan for Debt
Not all debt is created equal. As you near retirement, you’ll want to prioritize paying off high-interest debt—like credit cards—while considering how to handle other types, such as your mortgage or student loans.
While it’s smart to pay off debt before you retire, some debts (like a low-interest mortgage) may be easier to manage. On the other hand, high-interest debts can quickly eat into your budget, so addressing those first is key. If necessary, explore options like debt consolidation or refinancing to make your debt more manageable. The goal is to find a strategy that fits your needs and timeline.
4. Build an Emergency Fund
Emergencies happen. That’s why an emergency fund is crucial to your retirement planning. Whether it’s an unexpected medical bill, a home repair, or even a surprise opportunity to travel, you don’t want to have to dip into your retirement savings—or take on new debt—to cover unplanned expenses.
Having a separate emergency fund of at least three to six months' worth of living expenses can help give you peace of mind, knowing you’re prepared for whatever life throws your way.
5. Look for Ways to Cut Expenses
As you approach retirement, it’s a good time to look at your spending and see if there are any areas where you can downsize or eliminate unnecessary costs. Maybe it’s paying off your mortgage early or moving to a smaller, more affordable home. Or perhaps you can trim your subscription services or sell things you no longer use.
Even small changes can add up over time, and cutting back now can free up more of your savings for the things you truly want to enjoy in retirement.
6. Review Your Insurance Coverage
As you near retirement, it’s essential to review your insurance policies to ensure they meet your needs. You might not need the same coverage you did during your working years, but you’ll want to make sure you’re protected for what’s ahead.
Key areas to review include:
- Health insurance: Understand how your health insurance will work with Medicare (if you’re eligible), and consider additional coverage to fill any gaps.
- Life insurance: Does it still make sense to have life insurance in retirement? This depends on whether you have outstanding debts or wish to leave an inheritance.
- Long-term care insurance: With nearly 70% of people over 65 requiring some form of long-term care1, it’s worth evaluating if this type of coverage makes sense for you.
7. Plan a Tax-Efficient Withdrawal Strategy
Just because you're retired doesn’t mean you won’t owe taxes. Distributions from your retirement accounts, along with income from pensions or Social Security, may all be taxable.
Before you retire, take time to understand your tax situation and how best to withdraw funds from your retirement accounts. A thoughtful, tax-efficient strategy can help minimize your tax burden and maximize the funds available for your lifestyle.
8. Determine When to Claim Social Security Benefits
Deciding when to claim Social Security benefits is an important choice that can significantly affect your income during retirement. You can begin claiming at age 62, but delaying until 70 can increase your monthly benefits. If you’re in good health and don’t need the money right away, waiting could be a smart move.
Of course, if you need the income sooner, it might make sense to claim earlier. The key is understanding how timing affects your overall financial picture and making the choice that aligns with your goals.
9. Revisit Your 401(k) and IRA Asset Allocation
Your retirement accounts—such as 401(k)s and IRAs—should reflect your retirement goals, risk tolerance, and time horizon. Revisit your asset allocation regularly to make sure it’s in line with where you are in life. As you move closer to retirement, you may want to shift toward more conservative investments to protect your savings from market volatility.
You’ll also want to make decisions about what to do with any old 401(k) plans—whether to keep them, roll them into an IRA, or move them to a current employer’s plan. Just be sure you’re clear on the pros and cons of each option.
10. Rebalance Your Portfolio
Over time, your portfolio’s asset allocation may shift due to changes in market conditions. Rebalancing allows you to adjust your investments so they better align with your retirement goals. This is an opportunity to reduce your exposure to risk, ensuring your portfolio is positioned to meet your needs while managing potential volatility.
Remember, when rebalancing, consider the tax implications of buying and selling assets. You’ll want to make sure your strategy is aligned with your long-term goals.
Let’s Connect
Retirement is a big transition, and you don’t have to face it alone. If you’re unsure about where you stand or have concerns about your financial future, let’s sit down and talk. We can work together to ensure you’re ready for the retirement you’ve worked so hard to achieve.
1) Painter, Kim. "Understanding Long-Term Care Insurance." AARP, 13 October 2021, https://www.aarp.org/caregiving/financial-legal/info-2021/understanding-long-term-care-insurance.html.