In theory, the ideal time to plan for retirement and save for retirement is in the decades leading up to retirement. As you approach retirement, it’s important to carefully consider how to manage your finances and take care of yourself to ensure you have enough money to sustain your lifestyle after retiring. So, what should you do in the five years leading up to retirement to feel secure?
First and foremost, adjusting your mindset is crucial. During the five years leading up to formal retirement, it’s essential to mentally prepare yourself for the transition from a working life to a retired life.
You need to understand that your current lifestyle and your future lifestyle after retirement are two very distinct ways of living, and smart individuals will gradually adapt themselves. The better you adjust, the smoother the transition will be when it comes time to retire.
Secondly, the preparation work before retirement should be moderate. If you exert too much effort, you may end up feeling overly stressed, and if you don’t prepare at all, you could find yourself feeling lost when retirement arrives.
If you feel unprepared, of course, you can consider postponing your retirement; however, if you wish to retire as originally planned, it’s essential to make thorough preparations.
The first thing to do in preparation is to assess your current financial situation, calculate your future retirement income, and then adjust your financial planning accordingly as needed.
For instance, consider:
– How much do you currently spend each month? Do you anticipate an increase or decrease in expenses after retirement? Estimate how much income you will have after retirement to determine if your current expenses are reasonable.
– How much do you currently earn? Where does this income come from? Will you still have these sources of income after retirement? For most people, income decreases significantly after retirement.
– How much savings do you currently have? What types of investments do you have? If you adhere to strict money management principles, such as the 4% rule, how much money will you have available to spend each month?
Since you are not retiring within five years, if you continue to invest and the returns remain stable, how much will your principal increase? How much extra money will you have for spending?
Medical care will be a significant expense after retirement, and your medical insurance coverage may decrease as you age, even if you are currently satisfied with it; but as you get older, health issues are likely to increase.
Therefore, it’s important to invest in your health now and take care of yourself before retirement.
If your insurance offers benefits, make sure to participate in regular health check-ups. Regular check-ups may be a bit of a hassle, especially when you’re busy, but it’s worth it as it can help detect problems early and even save lives.
Dental health should not be overlooked. Use your dental insurance to address any long-standing dental issues while you are younger and have higher income. For example, dental implants look and function similarly to natural teeth, and can replace missing teeth; however, there are risks as you get older, so it’s better to get implants earlier if possible.
If there are any health issues that need treatment or surgery and you have been putting them off, now is the time to address them. Consult with a family physician to assess your condition, determine the appropriate treatment, and proceed accordingly.
You can also improve your health and reduce medical costs through lifestyle changes. Take action now so that you can maintain your health before retirement and easily stick to healthy habits after retirement.
Watch your diet, avoid consuming too many calories, and make sure to eat a variety of fruits and vegetables, low-fat proteins, and whole grains daily, while also staying hydrated.
Engage in physical activity as much as possible, as it can relieve stress and promote physical well-being. Even just taking a walk outside can be beneficial.
If you have habits like smoking or drinking alcohol, quitting may be challenging at this stage. However, studies have shown that even individuals with decades-long smoking habits can regain their health after quitting. You can do it too!
Next, calculate your expenses after retirement. For most people, life tends to become more frugal and constrained after retirement due to aging and reduced income. Some individuals are comfortable with this lifestyle, while others are not.
Estimate the following expenses:
– Is your mortgage fully paid off, or will it be soon? Have you considered moving? What kind of house are you interested in?
– What medical insurance will you have after retirement, and how much will the premiums be? What will be covered? If your health declines, how much will outpatient visits, treatments, and prescription medication cost you? It’s essential to plan ahead for these scenarios.
– Estimate your food and household expenses after retirement. Think about ways to purchase affordable and nutritious food.
– How much will your travel expenses be after retirement? What leisure activities do you plan to engage in? What interests do you want to cultivate? While leisure expenses are not essential, they should be considered when making retirement plans.
Of course, retirement expenses are not limited to just the above categories, but these are the most important and manageable costs.
For many retirees, downsizing to a smaller home becomes necessary to reduce expenses. You can move to a more affordable area, downsize your house, and thereby reduce monthly expenses, freeing up extra money for investment or other purposes.
As you age, changing houses becomes more challenging because mobility decreases, and individuals are less inclined to change their environment. If you intend to move to a smaller house after retirement, it’s better to do it while you still have the physical strength, favorable conditions, and adaptability.
Having a side job after retirement can be beneficial for earning extra money, slowing down the depletion of your retirement savings, while also keeping your mind and body active, delaying aging.
The key is to find a sustainable side job, meaning it should be something you can do now and continue to do after retirement. Starting a side job before retirement and maintaining it afterwards can ensure a smooth transition.
Here are some good side job options:
– If you enjoy photography, creating art, or have some graphic design skills, consider freelancing. You can choose your clients, set your working hours, and even work from home. Isn’t this a fantastic retirement side job?
– If you have a car and good driving skills, consider joining a ridesharing service. Apart from earning extra income, you can meet new people and explore different corners of the city.
– With your valuable professional skills, you may consider working as a coach or consultant for companies. This allows you to earn extra income while supporting young professionals in the workplace.
– If you are interested in entrepreneurship, consider operating an online store. Launching unique content, selling quality or self-made products can lead to substantial profits.
Retirement should not only be financially secure but also fulfilling. Therefore, you should cultivate hobbies to enrich your life and maintain social relationships. The more time you invest in hobbies and social activities, the more fulfilling your retirement will be.
Here are some common hobbies to consider:
– Gardening requires some physical effort, but it’s not overly strenuous, and the produce is both visually appealing and practical. Growing fruits and vegetables can even help you save on food expenses.
– Whether you enjoy dance for its skill or self-expression, frequent dancing can help you stay in shape and is a great social activity. Start with simple moves and progress to more advanced routines.
– Many retirees enjoy playing golf as it is relaxing, offers a competitive element, and is a gentle outdoor activity. If financially viable, now is a good time to learn or improve your golf skills.
– Photography is relatively easy to get into, but mastering it can be challenging. By investing time to learn and acquire more skills, you can also earn extra income.
– If you prefer outdoor activities without too much physical strain, birdwatching can be a peaceful way to connect with nature. You can share your unique experiences with others afterward.
– Many retirees seek to continue learning new things, even if they may not be directly applicable. Look for community colleges offering courses, seminars, or clubs to join. If none are available, visit the local library or explore online resources like YouTube channels from home.
No one likes to think about death, but it’s a reality that needs to be addressed. It’s best to arrange matters beforehand. The sooner you plan your posthumous affairs, the more time you’ll have to make all necessary arrangements. It’s advisable to start the process before retirement. Create a will, outline your estate handling preferences, and if necessary, develop an End-of-Life Care (EoLC) plan.
While you may choose a specific retirement date, retirement should not be an exact moment but rather a gradual process. During this phase, your financial acumen matures, and your retirement plan becomes more refined. By beginning to plan five years (or even earlier) before retirement, you can ensure a better retirement life in the future.