If you’ve handed in notice to your boss that you’ll be officially retiring in a few months, you’re likely both nervous and excited.
That’s understandable. Retirement is a big life transition. It helps to have a solid financial plan and the resources to support it to feel comfortable as you wave goodbye to your working life.
Here are some ways to prepare for the transition.
The final months before retirement are a crucial time to determine how much money you have and finalize a withdrawal strategy to ensure it lasts.
Budgeting for current and future expenses will help you come up with an effective withdrawal plan.
For many, the 4% rule is a decent guideline. This entails withdrawing 4% of your retirement savings in the first year, then adjusting the amount for inflation in subsequent years.
Depending on your portfolio, this strategy should ensure that your retirement savings last 30 years or so. The average American enjoys 20 years post-retirement.
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If you’ve invested in a workplace pension plan, look at your individual benefit statement to find out how much you’ll receive each month. Married couples may have different choices if an employer offers spousal benefits.
Depending on your age, you may also qualify for Social Security. The monthly benefit you’ll receive is based on how much you’ve paid in taxes and whether you choose to collect your benefits early or delay them until after your official retirement age.
The Social Security Administration website offers an online tool to calculate how much you could get in different scenarios.
When budgeting for retirement, keep in mind that you may not spend money the way you did while you were working. Maybe you’re close to paying off your mortgage, leaving you with extra funds. Perhaps you want to travel more, increasing your travel costs..
Don’t forget to budget for the long term as well, factoring in things like home renovations to help you age in place or the funds you might spend on health care down the road.