Focus on These Three Tasks for an Easier Transition Into Retirement

Tossing extra funds into your retirement account isn’t the only way to prepare for retirement. Today we’re identifying three areas of retirement planning that you can start today:

  1. Start Building an Emergency Fund

  2. How to Deal with your Debt

  3. Take the Time to Educate Yourself 

We’re going further than just telling you to pay off loans or to stash cash, we’re providing helpful tips to get you started along with how these actions can impact your future retirement. Whether you’re dreaming of retiring to the alluring beaches of Delaware or you’re far away, enjoying the desert heat or taking in mountain views — these tips apply to you. 

RETIREMENT IN REHOBOTH BEACH, DE

Build an Emergency Fund for Retirement 

We often refer to a retirement emergency fund as a ‘War Chest’. War Chest funds act as a form of protection within your retirement plan — allowing you to overcome unforeseen financial circumstances so they don’t derail your retirement plans. 

The term War Chest is not meant to inflict fear and does not entail taking extreme measures like stashing large sums of cash under the mattress. It’s far more about being prepared for the reality that we need the ability to pad our monthly budgets now and then to cover unforeseen expenses. Examples include:

  • Unexpected medical bills from an illness or accident

  • Replacing a broken appliance or fixing a malfunctioning vehicle

  • Requiring cash to cover monthly expenses during temporary downturns in the market.

An emergency fund is often a mix of liquid funds in a savings account along with additional funds in CDs or bonds, allowing for stable and predictable growth. Consider the three examples above for using emergency funds; while the first two may easily come to mind, let’s take a closer look at the third point about temporarily covering monthly expenses. 

Retirees often sell equities each month to generate a stream of income, but temporarily turning to cash and bonds when the stock market is pressed downward can help avoid selling equities at a loss. By leaving equities untouched during downturns in the economy, you’re putting the age-old mantra of ‘buy low, sell high’ into action. 

Retirees that can abide by this wise saying enjoy the stock market rebound that inevitably follows. The economy is ever-changing, and it’s important to remember cyclical downturns don't last forever. With a solid savings to lean on, you can cover short-term expenses and offset a certain amount of risk associated with the ups and downs of the equity market swings.

Deal With Your Debt Before You Retire

In a recent blog, we talked about carrying a mortgage into retirement. In that article, we cited approximately “44% of 60 to 70-year-old homeowners bring their mortgage into retirement.” A late 2021 study found similar results related to debt in general, showing “46% of all Americans expect to retire in debt.” (1)

While the statistics show that retiring with debt is becoming increasingly more common, it simply doesn’t make the transition into retirement any easier. If you have several debts, consider working on paying off the smallest debt first. From there, use the motivation and feeling of satisfaction to continue tackling other debts.

Another method is to focus on the debt with the highest interest rate. Paying off this debt early will save you the most in interest payments over time. To focus on one debt at a time, consider  paying the minimum due on all other debts while prioritizing all extra funds in your budget towards the debt in the spotlight.

In today’s world of side gigs and working remotely, there are many ways to add extra funds to your monthly budget. Depending on your goals and amount of debt, this may also be a time to strongly consider downsizing, especially if your debt is tied to recreational items or a large mortgage that’s stressing your budget. 

Educate Yourself — Change is Coming When You Retire 

If you’ve made it this far, then we know you’re dedicated to learning the ins and outs of retirement planning. So where should you start when it comes to self-education? 

  • Social Security — Understand when you’re eligible along with the benefits of delaying the start of your benefit.

  • Medicare — You have options, and it’s important to understand what they cover and the cost associated with each. More importantly, taking time to research what Medicare does not cover so there are no surprises down the road.

  • Income streams — how much will you have coming in each month when you’re living on a fixed income?

  • Retirement budget — Start gaining a detailed understanding of all the expenses you’ll have in retirement. Even if your house is paid off, you still owe taxes, the utility bills won’t stop, the fridge will need to be restocked, and of course, you want to have some fun. 

Build a Retirement Plan Revolving Around Your Dreams

Taking early action in your retirement planning journey can lead to an easier transition into retirement.  Having extra funds each month or reducing your expenses are key ways to enter retirement with added confidence along with the ability to take that dream vacation.

Whether it’s spoiling your grandchildren, revving a Camaro, leaving a legacy for the next generation, supporting your favorite charities, or taking day trips without guilt — everyone's dreams for retirement are different. When retirement is at the forefront of your conversations with your partner or friends, reach out to one of our financial advisors.

We’re here to guide you through each step of retirement, help you create an all-encompassing plan for reaching your financial goals, and ultimately help you land in retirement with confidence and comfort. 

About Integrated Wealth Management

Integrated Wealth Management is owned by Burt Hutchinson, CPA, CFP®. We’re a CPA-led organization, meaning we’re here to handle your complex tax scenarios and provide cost-saving insight related to your financial plan.  

We’re here to guide you through the 3 stages of retirement:

  1. Uncertainty Stage: When you are within 10 years of retirement and have questions about how to make it work

  2. Stability Stage: When you have reached the financial milestone to retire comfortably and confidently

  3. Reflection Stage: When you are looking to leave a legacy

We are also here to provide experienced, empathetic support during times of loss, such as the death of a life partner. You need confidence and a sense of security to enjoy retirement. As fiduciaries with a fee-only structure, we never receive commissions. Free of ulterior motives, you can be sure we’re focused on your goals.

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