Understanding Pre-Retirement
The period between deciding to retire and committing to an actual retirement date is pre-retirement. This phase of retirement planning is vital to understanding financial obligations and the reality of the desired timeline. Failing to plan correctly can leave you struggling financially in your "golden" years — not a way to spend life's winter.
While some people can plan for retirement early, taking advantage of IRAs, 401K funds, and investments, others do not have that luxury. Many people cannot save for retirement as early as they'd like because of their situation or circumstance.
Regardless of when you started saving for retirement, you do not want to jump willy-nilly into retirement. Preparation is your friend, and as many financial experts advise, a dry run of your retirement is the best way to start your pre-retirement strategizing.
How To Make a Dry Run
A retirement dry run is a way of experiencing retirement finances without the risks of losing your primary income. Essentially, you want to spend some time figuring out how much money you would get from social security and other savings and investment accounts if you retired today. With your calculations on hand, try to live on just that income for several months. If you are not good with math, consider speaking to a financial planner or accountant.
If you find living on the predicted monthly amount challenging, postpone your retirement plans. Delaying your retirement will allow you to continue to contribute to the various retirement accounts and funds, allowing you to increase the eventual payout.
A dry run is an excellent and safe way to test your retirement plans taking no real financial risks. However, a dry run is not the only thing to consider during pre-retirement.
Questions To Ask During Pre-Retirement
Retirement represents a significant life change, both financially and socially. Before you take the plunge, ask yourself several pertinent questions.
What Does Life Look Like After Retirement?
Retirement is not all about fishing and reclining. While you should take advantage of some extra free time, ensure you fill your life with a new purpose or hobby.
Many people struggle during retirement, especially workaholics. It is common for busy professionals to feel lost or even worthless after retirement. Those feelings can snowball into serious mental health issues, like depression and anxiety.
Take the time during pre-retirement to consider life goals after retirement. Do you want to find a part-time job, take more vacations, visit family, or take up a new hobby? Make plans, and plan to live.
Do You Want To Move?
While many people want to remain in their current home, especially if the mortgage is paid, staying in your home might not be practical. If you live in a multi-story home in a rural area, it might be more practical to find a ranch or ranch-style apartment closer to hospitals and shopping. Downsizing is also an excellent way to cut costs.
If you want to stay in your home, consider renting a room or floor to a tenant. Renting out a portion of your space can help supplement your retirement income.
Pre-retirement is a precursor to actual retirement and represents a time to get your affairs in order. A fiduciary or financial planner can help if you're feeling unprepared.