6 Financial Steps to Take When You Are Ready to Retire

: 6 Financial Steps to Take When You Are Ready to Retire

Retirement is one of life’s exciting transitions. From accruing savings during your working years to using that money to achieve a relaxing, comfortable life in your golden years, retirement brings a new set of opportunities (and risks) to plan for.

For many Americans approaching retirement, whether or not they can afford retirement is a very real concern. It takes careful planning during the final decade of your working years to make your money last the rest of your life.

Retirement involves so much research—and so many questions —that it can seem like, well, work. Here are 5 simple financial steps to take when it’s time to turn the page and retire. 

  1. Define the retirement lifestyle you want. A comfortable retirement greatly depends on the depth of your financial resources. Just how deep your financial resources need to be can be difficult to establish unless you’re clear on what you want to accomplish.
  • What lifestyle do you wish to lead in retirement? Do you plan to retire totally or keep working part time? Some folks actually like to work during their retirement.
  • Do you plan to travel the world or spend your retirement days playing with your grandkids? An active lifestyle will require deeper pockets.
  • Do you plan to relocate abroad? Doing this can affect your personal taxes and your ability to tap government benefits.

Setting out a clear vision sooner rather than later will help you to be ready to kick off your retirement when and how you want.

  1. Crunch the numbers. As you approach retirement, you will start to say goodbye to certain expenses. Student loan and mortgage payments will be minimal if they’re not already paid off. You’ll also save on clothing and commuting.

That said, don’t make the mistake of assuming that your retirement savings will remain untouched. Even “the simple life” comes with expenses. For example, you may spend more on health-related matters, home renovations to accommodate your changing needs, and hobbies (such as gardening, golf or sailing).

Another mistake to avoid is solely depending on general guidelines to calculate your future spending. Remember, retirement is different for everyone. Make sure your projected expenses reflect your unique circumstances.

  1. Consider ways to boost your income. You’ll probably have a few income sources during retirement to help you fund your living costs. If, however, you don’t have a defined benefit plan from your employer, pensions alone may not be enough. You will need to generate income to fill the gap.

Evaluate your expenses to ensure you’re targeting the right amount of income needed. Any income deficit will have to come from your personal savings. Consider establishing a monthly income stream to mimic getting a paycheck.

Having more income is never a bad thing. Income can come from annuities, rental income, proceeds from the sale of your home or business, etc.

  1. Ensure your investment portfolio has the right blend of growth and safety. According to the most recent data from the CDC, life expectancy in the U.S. is 78.7 years. And that’s only the average. Many seniors will live into their 80s, 90s and beyond.

As life expectancy surges, the time you spend in retirement can appear to rival the time you spent working and saving for retirement.

It can be a challenge for your portfolio to have decades of retirement to fund. To avoid outliving your money, you’ll need your portfolio to generate sustainable income that will supplement your pension and other income sources.

Adjust your investment mix. A diversified portfolio of cash, stocks and bonds will see that you not only have to depend on interest, but you can also enjoy the potential tax benefits of earning capital gains and dividends.

When striking a balance between safety and growth, take into account your risk tolerance, objectives and the retirement period you expect to fund.

  1. Build an emergency fund. Before you retire, you want to ensure that you’re covered in case things don’t go according to plan. If you’ve somehow gotten this far without a rainy day fund, now’s the time to create one.

A cash cushion can make up for delays in the start date of your Social Security or pension. Instead of your retirement savings, you can tap your emergency fund to avoid an early withdrawal penalty when an unforeseen life event occurs.

It will also help avoid the temptation of selling into a falling market for funds to cover your living expenses, giving your portfolio time to recover.

Aim for three to six months’ worth of living expenses.


  1. Get rid of high consumer debt. In an ideal world, we would all enter retirement without debt. But we don’t live in an ideal world.

If you’re nearing retirement, it’s time to closely monitor the debt column of your inventory. Paying off your debt before retirement is a brilliant strategy to decrease overall expenses afterward.

You can either tackle debts with the highest interest first (Avalanche method) or debts with the smallest balance (Snowball method). No matter which debt repayment method you choose, the most important thing is to stick with it.


Having retirement goals and tracking your progress toward those goals is vital throughout your life, but it becomes increasingly important as retirement nears. Even if your planned retirement date is years away, taking financial steps to prepare for a smooth transition now will set you up to enjoy the comfortable, secure and fun retirement you deserve.