If you've put in multiple decades in the workforce, you may be reaching a point where you're ready to start the countdown to retirement. And that's understandable. After years of hard work, you deserve a period of life that's far more stress-free and unscheduled.
But it's important to go into retirement fully prepared financially. And to achieve that goal, you should make a point to tackle these key moves as you near your anticipated retirement age.
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1. Get an estimate of your monthly Social Security benefit
If you worked full-time for multiple decades, then you're most likely entitled to a monthly benefit from Social Security. But don't just guess at what that payday might entail. Instead, access your most recent earnings statement so you can see for yourself how much monthly income you're looking at.
Now do keep in mind that your Social Security filing age will help determine how much money the program pays you each month. Filing on time, at full retirement age, will ensure that you get the full monthly benefit you're entitled to based on your personal wage history. An early filing might seem tempting, and it might even allow you to retire earlier, but it will also mean getting a lower monthly Social Security benefit for life.
2. Figure out your annual income from savings
You may be retiring with a six- or seven-figure nest egg. But it's important to see how much annual income that translates to.
And if you're planning to rely on the old 4% rule to dictate your withdrawal strategy, it pays to think again. That's a pretty aggressive withdrawal rate for the typical retiree today. And if you think your retirement will be longer than the average, then you should seriously consider limiting yourself to a 2% or 2.5% annual withdrawal rate.
Run the numbers, though, to see how much income that gives you each year -- and make sure it works for you. Withdrawing 2% of a $1 million nest egg means you're only getting $20,000 of annual income. Unless you have a generous Social Security benefit to look forward to, you may need a backup plan, whether it's postponing retirement for a couple of years or part-time work.
3. Read up on what Medicare does and doesn't cover
Many retirees are thrown for a loop when they start getting coverage through Medicare and realize that the program won't pick up the tab for a number of key expenses. The time to read up on Medicare and how it works is before you retire, not after. That way, you can see what costs you're liable for and make sure your income is sufficient to cover them.
Remember, too, that you'll likely have to share in the cost of many of the services that Medicare does cover. So all told, you'll want to make sure your retirement income is robust enough to pay for your healthcare needs.
It's a fun thing to be able to count down to retirement. But make these important moves before your career wraps up so you don't end up stressed out financially once your retirement officially begins.
