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Retiring Next Year? Get a Jump-Start on These 3 Things

By Christy Bieber - Dec 13, 2020 at 6:16AM

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Now is the time to check them off your list.

If you plan to retire soon, there are lots of tasks to check off your list to make sure you're financially prepared.

There's no better time than now to get ready, so consider taking these three steps as soon as possible.

Older couple working with financial advisor.

Image source: Getty Images.

1. Rebalance your portfolio 

Retiring represents a major shift. You'll likely stop putting money into retirement accounts and will begin taking cash out of them. Since you'll be relying on your investments, you can't afford excessive risk.

Unfortunately, far too many people get complacent (especially when things are going well) and end up overinvested in equities. You don't want to be in this position -- a market crash at the wrong time could force you to sell investments at a big loss because you need the money. 

To avoid outsize losses you may not be able to recover from, rebalance your portfolio now if you're going to retire soon. To figure out the amount of your money that should be in the stock market, subtract your age from 110. If a larger percentage is invested, consider selling some equities ASAP.

2. Check your insurance options

As a retiree, healthcare will probably be one of your biggest expenditures. You don't want to be surprised by big medical bills, so read up on what your insurance will cover.

If you'll be 65 or older when you retire, you should qualify for Medicare. It has different parts, including Part A for hospital care, Part B for routine care, and Part D for prescription drugs. Some seniors also opt out of traditional Medicare and choose an Advantage Plan instead. Private insurers offer these, and while they must pay for all services traditional Medicare does, they can also offer more coverage. 

You can't assume Medicare will be sufficient to cover all your care. Before you retire, look at co-insurance costs, co-pays, and premiums to understand what Medicare will do for you.

If you aren't going to be 65 by the time you quit work, you won't be eligible for Medicare immediately and should explore your alternatives. Most of them, such as maintaining coverage through COBRA, may be financially impractical. You must have affordable insurance, otherwise you could face devastating medical expenses that cause your entire nest egg to disappear quickly. 

3. Review Social Security claiming rules

Social Security is an important, but complicated, retirement benefits program. Learn a few key rules to make the best choice about when to claim benefits.

In particular, you should know what your full retirement age is, how filing before or after it could affect the size of your monthly checks, and whether you're eligible for spousal or survivors benefits. By knowing all the different kinds of benefits you could receive and how your age at retirement affects your monthly income, you can pick the best claiming strategy.

You'll also want to know when you become eligible to claim benefits, and how far ahead you should file if you want them to start in a particular month. By learning all the rules, you won't inadvertently shrink these important benefits throughout your later years. 

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