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By Charlestien Harris

Retirement is a subject that many of us think about at some point in our lifetime.  The earlier you begin to plan for this major milestone in your life, the more prepared you will be to make the transition financially.  

According to the U.S. Census Bureau, the average retirement age is 63 and the Social Security Administration defines full retirement age as between 65 and 67, depending on your year of birth. Making the decision of when to retire is one of the hardest decisions you’ll have to make. If you make the decision to retire too late, you may not have the energy to enjoy it.  By the same token, if you retire too early, you could end up in financial trouble. 

So how can you know if you’re truly ready to retire?  Traditionally most people only think of the 401K retirement plan that their employer may offer, but there are other factors that affect the decision of when to retire and how you will fare financially when you actually do retire.  Having a retirement account or retirement savings is a great place to start, but it is not the only move you need to make to enjoy a comfortable retirement income.  

One of the first steps you should take is to evaluate your current monthly budget.  This will give you a good idea of how much money you will need to live comfortably and meet all of your financial obligations.  Once you review your budget, you should list every debt, liability, savings balance, income stream and insurance policy you have. Don’t forget about properties, vehicles and other valuable possessions that affect your bottom line.  

Another step is to establish an emergency fund.  I mentioned this in a previous blog and it should most definitely be included in the retirement planning process!  Emergencies and unexpected events still happen, even in retirement and whenever they may happen, they will affect your money flow if you have not budgeted properly.  Remember to include expenses currently covered by your employer (like healthcare) because your emergency fund will need to transition into retirement with you.  

In an ideal world, we’d all be debt free; however that is not often the case. Once you retire, your income is likely to decrease, so any fixed payments will start to take up a larger share of your expenses. Therefore, a third step is to calculate all your debts and start a debt elimination plan prior to retiring. Be sure to add interest rates and terms to your outstanding debt balances so you will know where you stand when it comes to how much you owe your creditors.  It would be ideal if you could have all of your debt paid off before you retire because that would give you more flexibility when it comes to how you spend your discretionary income.  

Fourthly, healthcare is one of the biggest expenses you’ll face in retirement and should be budgeted accordingly. Healthcare costs can account for an average of 11% – 15% of retirement spending, depending on your age.  Because of this, you should consider how you are going to tackle making sure you are covered, whether it be from a former employer plan,  government plans such as Medicare/Medicaid or an independent insurance policy you purchase.  You don’t want your insurance to lapse during the transition so planning ahead really helps to prepare you.  

The fifth step is one that no one likes to think about, but as you near retirement you’re also realistically getting closer to the end of your life. Being prepared with an estate plan will ensure your family is not plagued with financial burden after you’re gone, and that your money is dispersed according to your desires.  In addition to creating a will, you’ll need to assign a power of attorney and healthcare directive to make decisions on your behalf should you become incapacitated. You’ll also need to appoint beneficiaries on life insurance plans, retirement accounts and shared assets.  

I will continue this topic next week with some additional steps to plan for a successful retirement process.  For more information, please contact me at or call me at 662-624-5776.  Until next week, stay financially fit!