As retirement approaches, it's natural to find yourself growing increasingly excited. After all, you've worked hard your entire life to be able to call it quits, so go ahead and celebrate that the milestone is closing in.
At the same time, it's important to make sure you're setting yourself up for a successful retirement -- and one that's not financially stressful. To that end, aim to make these important moves a year before your workforce exit.
1. Get an estimate of your monthly Social Security benefit
Social Security might end up playing a big role in your retirement. So it's important not to guess at your monthly benefit but to know exactly what it looks like. That way, you can opt to take on certain expenses (or not) based on that number.
If you're a year from retirement, your most recent Social Security earnings statement likely has an accurate estimate of the monthly benefit you're in line for. Of course, your filing age will have an impact on the amount of money you receive each month. But you'll know from your earnings statement what sort of benefit to expect if you sign up for Social Security at full retirement age.
If you're 60 or older, you should've received your most recent earnings statement from Social Security in the mail. Otherwise, you can access it on the Social Security Administration's website.
2. Figure out how much annual income you can get from your savings
Ideally, you'll be entering retirement with a decent chunk of savings. But it's important to know what the big number you're seeing on screen means in terms of annual and monthly income. That, too, is a crucial part of determining what expenses you can and cannot afford to take on.
To get to that number, you'll first need to come up with an annual withdrawal rate. And you may not want to go with 4%, even though it's a rate that's long been recommended. Rather, a more conservative 2.5% or 3% may be more appropriate, though that'll depend on how your assets are allocated.
A good bet is to sit down with a financial advisor a year before retirement and work together to come up with a suitable withdrawal rate. From there, you can narrow down your plans.
3. Make sure you have health coverage lined up
If you're retiring at age 65 or later, you'll have access to Medicare coverage. Medicare won't necessarily pick up the tab for every single service or treatment you might need. It won't, for example, pay for dental care. But you'll certainly be covered for things like emergency room visits and preventive care.
It's really important to have a plan for health coverage if you'll be kicking off retirement prior to age 65. If you have a spouse who's still working and you can get on their health plan, great. Otherwise, research the cost of buying insurance so you're not thrown for a loop when you see how expensive it is.
It makes sense to get excited about retirement when it's right around the corner. But make sure to check these financial moves off your list ahead of time so you don't encounter any unwanted surprises once your career officially comes to a close.