Imagine that this is the last day of your career. You roll into the office, have a brief chat with HR while you fill out all the necessary paperwork, and station yourself right beside the coffee machine to share the good news with everyone as they walk past the cafeteria.
You take an extra long lunch with your closest working buddies and have a great time because, for the first time ever, you don't care about walking past the boss's office after running a little late. Then you back up all your personal files and web bookmarks on the company laptop and start making your rounds to personally thank all those at the workplace who have truly helped you over the years.
However, it will only be possible to have this sort of relaxing last day of work if you have made the necessary preparations for retirement. Here are a few activities soon-to-be retirees should do before they call it quits:
Figure out a game plan for drawing down your assets. It's surprisingly common for folks to retire without a plan, which includes how they should efficiently draw down the nest egg they've spent decades building. Creating and following a solid plan will not only allow your assets to last longer, but it will also allow you to sleep better at night because you will be more confident in how much you can spend without depleting your savings too quickly.
Start living on your projected retirement income while still employed. One of the most accurate ways to test drive retirement finances is to start living on your projected income in retirement while you still have earned income. This way, there's still room to make changes and adjustments if there’s a need.
Don't forget about Social Security. One major source of income after you no longer get a paycheck is going to come from the government in the form of a Social Security check. Monthly payments increase for each year you delay claiming between ages 62 and 70. Make sure you do the calculations to determine the best age to sign up for your personal situation.
Consider doing major home repairs. Many older homes can probably use a newer roof, more energy efficient windows, a kitchen remodel, and other repairs. If any of these major expenses are due in the near future, you might want to do them before you retire. These types of projects usually go over budget, which could throw your retirement estimates into disarray.
Consider refinancing or applying for a home equity line of credit. I think the psychological benefit of being debt free far outweighs the potential excess return you could get by leveraging your assets after you retire. But if you must, consider refinancing to lower your finance charges or applying for a home equity line of credit for potential emergencies while you still have a job. Once you quit, it will be difficult to qualify for loans.
Make sure you are aware of your retirement plan vesting schedule. The retirement account at your employer likely has some type of vesting schedule that restricts the portion of the employer match you can keep based on your years of service. The last thing you want to find out after you hand in your resignation letter is that you could have been eligible for a bigger chunk of your employer match if you only worked for another month.
Look into your tax situation. Once you no longer receive a paycheck, it also means that Uncle Sam is no longer getting a periodic tax payment from you. A smaller tax bill will certainly help your retirement finances. However, some folks may need to start paying estimated taxes throughout the year, and the penalties for not paying could be steep.
Take advantage of your health benefits. Dental work, dermatology consultations, getting a pair of new glasses, physicals, and even prescriptions may be cheaper while you are still under your employer plan. Make sure you get your screenings done and have medical issues taken care of so that you won’t end up paying more than you need to.
Double check that you have health insurance in place. Health insurance is a major cost for the elderly. Take the time to find a good health insurance plan and to fully understand the different options. Make sure you are already enrolled or can immediately enroll in a health plan as soon as you are no longer covered by the employer plan. It’s important to sign up for Medicare Part B at age 65 or when you leave your group health plan, because premiums will go up by 10 percent for every year that you are eligible but delay opting into the program. Good health insurance is essential to help your nest egg last throughout retirement.
David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.