Retiring in 2021? Here Are Some Financial Things to Do

If you've put in your time in the workforce, you may be gearing up to leave it in 2021. But before you retire, make sure to check these key items off your list.

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Retiring with inadequate savings is a good way to set yourself up for a stressful retirement. Rather than run that risk, see what your 401(k) or IRA balance looks like. As a general rule, it's wise to end your career with about 10 times your ending salary socked away, so if you're nowhere close, you may need to make some adjustments to your plans.

ALSO READ: Retiring in 2021? Not Making This Move Could Cost You $17,000

You can't afford to take on undue risk in your portfolio when you're about to retire. Examine your investments now and make sure they're allocated appropriately given your age and near-term plans. In addition to shifting toward conservative investments, like bonds, you should also aim to have a year's worth of living expenses in cash -- especially at a time like this, when the economy is in bad shape and the stock market is so volatile given the ongoing pandemic.

You need to be at least 59 1/2 to withdraw funds from a 401(k) or IRA without incurring a penalty. If you're not eligible for penalty-free withdrawals, you'll need to secure a backup income source before moving forward with your retirement plans.

If you have a paid-off home or one you have a lot of equity in, applying for a home equity line of credit, or HELOC, is a smart bet. That way, you're not taking out an actual loan, but rather, you're giving yourself the option to take out a loan if you need to. Say you retire next year and your portfolio value tanks. Having access to a HELOC could make it possible to leave your investments alone and let them recover fully.

ALSO READ: 5 Unexpected Sources of Retirement Income -- All Related to Your Home

Social Security eligibility begins at age 62, but you can't claim your full monthly benefit until you reach full retirement age. Figure out if you're able to collect a benefit at all next year, and if you won't be reaching full retirement age, determine how much a hit you'll take if you claim Social Security ahead of time.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

There are 13 states that tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. Some of these states offer an affordable cost of living in retirement, so you don't necessarily need to move because of Social Security taxes. But you should be aware that those taxes exist.

Medicare eligibility begins at age 65. If you're retiring before then, you'll need to determine what you'll do for health coverage, whether that means retaining your old employer health plan through COBRA or buying private insurance on the healthcare exchange.

ALSO READ: 3 Retirement Assumptions That Could Leave You Broke

If you own a larger home (or rent one), downsizing is a good way to lower your retirement spending. It pays to consider downsizing if you expect money to be tight, especially if you don't need the added space.

Some parts of the country are cheaper to live in than others. Once you're no longer tied to a job and a specific workplace, you may find that you have more flexibility to pick up and move someplace more affordable, so it pays to research your options.

Many retirees are shocked to learn that much of their income is taxable. Before you leave the workforce behind, figure out which income sources of yours will be taxed so you're able to anticipate that IRS debt.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Healthcare could end up being your largest expense in retirement. If you have access to a health savings account, it pays to max out your contributions before bringing your career to a close.

ALSO READ: 5 Secrets to a Stress-Free Retirement

Many seniors end up needing long-term care, and the costs involved could be astronomical. Lining up a long-term care insurance policy could help defray that potential expense and help you avoid a world of stress during your later years.

Owe a bit of money on a credit card or personal loan? If you're aiming to retire in the coming year, paying off that balance ahead of time could give you more flexibility once your paycheck disappears.

Once you retire, you may be more limited as to how much money you can spend. That's why it's crucial to create a budget beforehand. Doing so shouldn't take long, but it'll help ensure that you start off retirement on the right track.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

You may be excited to kick off retirement and enjoy the freedom of not having to report to work every day. But if you're looking to retire in 2021, make these important moves first. You'll be thankful you did after the fact.

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