It’s your last year of work. You’re spending more time looking at the countdown to retirement clock app on your phone than the excel spreadsheet that should have been completed a week ago. Still, you aren’t done yet, and there is still planning that needs to be done. You have already determined when you will draw social security, what healthcare will look like and where your income will come from in retirement. Now, it is time to finish the last minute planning details to catapult you into retirement.
Max out your 401(k) and HSA
No matter the month that you retire, you are still able to max out your 401(k) and HSA with the annual limit. So, even if you only work half the year, you can still put $24,500 in your 401(k) in 2018. You can only make 401(k) contributions through payroll deductions though, so once you retire from your job, you are retired from making 401(k) contributions. Consider raising your 401(k) contributions percentage at the beginning of the year to try to max out your contributions by the time you leave. The HSA works a little different because you can make contributions all year, unless you retire after age 65 and turn on Medicare. Just like your 401(k), max out your HSA before you retire through payroll deductions. Unlike the 401(k) though, you can continue to make HSA contributions after retirement, until you reach age 65, and turn on Medicare.
Visit the Doctor
Take advantage of that employer healthcare and go visit the doctor. Sore back? Nagging knee injury? Toothache that just won’t go away? Now is the perfect time to visit your doctor and dentist and get some of these issues resolved. There’s a very good chance that your health and dental insurance in retirement won’t be nearly as robust in retirement. Getting these operations while working should cost you a lot less. Also, do you really want to spend your first few months in retirement laying in bed, nursing a sore knee? No, you want to be experiencing your newfound freedom. Get fixed up before retirement and start your retirement feeling well.
Take a Practice Retirement Week
Practice makes perfect, and retirement is no different. Take a week off from work and practice what the rest of your life will look like. I’m not talking about taking a vacation to Hawaii for a week, or going on a golf trip with your buddies. I’m talking about what your retirement will really look like. Wake up, make breakfast, go for a walk, mow the lawn, watch the grandkids, clean the garage, and do whatever it is that you picture retirement to be. Yes, make plans with friends, play a round of golf, and go out for dinner. These won’t go away in retirement. If you spend your practice week bored and binge watching Netflix, start making a schedule of things that you want to accomplish each day. Retirement may be a breeze compared to working, but having an active and enjoyable retirement isn’t necessarily easy either.
Cancel Your Life Insurance Policy
The first expense that you should be getting rid of in retirement is your monthly life insurance premium. I wrote an article about life insurance, and most people don’t need it in retirement. If you have a whole life policy, you should consider cashing it out and taking the cash value. If you have a group plan through your employer, don’t renew it when you retire. If you have a term policy, you may not be able to cancel the policy now, but don’t renew it when it comes due.
Get Financing Now
If you are planning on buying a new retirement home or car, and need to get it financed, the time to do it is before you retire. Getting financing after you retire can be very difficult and without steady income you could also face higher interest rates. I realize it is easier to try to sell your home after you retire and have more time to spend on fixing up the home, but the financing will be much easier prior to retirement. Here is a post I wrote about financing your retirement home. Also, be careful about using any pre-tax assets, like a 401(k), to buy a home or car in retirement. The distribution can result in a huge tax liability and financing typically makes more sense than taking out a huge retirement distribution.
Cut Off the Kids
If you haven’t already, it is time to cut off the kids. Retirement is difficult enough trying to support yourself. Don’t complicate it by taking care of your kids as well. Now, I’m not saying to stop with Christmas gifts or even the occasional family vacation. If you are paying for rent, a car, school loans, or even a cell phone, it is time to stop. You have worked too hard to let the kids sacrifice your retirement. Sure, maybe you feel you still want to help out but at some point they need to know that retirement is your time.
Yes, retirement is right around the corner and you should celebrate that you have gotten this far. Still, you aren’t done yet and some final planning can really make a difference.