After years of dreaming, it’s finally almost here: Sometime soon, you plan to retire.
Perhaps you intend to quit working a decade from now — or this summer. Either way, you still have time to get your finances in shape before beginning what could be the happiest period of your life.
Following are seven key steps to ready your nest egg for retirement.
1. Consider talking to a pro
During retirement, you must be extra careful to squeeze the most out of every dollar you have saved.
Withdraw the money too quickly — especially during a bear market — and it might not last the rest of your life. Foolishly make withdrawals without thinking about the tax implications, and you could end up wasting a lot of cash.
So, even if you have a DIY mind, it might make sense to sit down with a fee-only financial adviser and get some expert guidance.
One fast and free way to find a vetted fiduciary adviser — meaning a professional who will put your best interest before his or her own wallet — is by using a service like Wealthramp.
2. Establish a monthly budget
How much will life’s wants and needs cost you each month during retirement? It’s crucial to know. So, sit down and crunch the numbers.
Total up your bills — mortgage, insurance, gas money, groceries. Then, figure out how much you spend on discretionary items and having fun.
Lastly, add all those figures together so you have a realistic sense of how much money you need to survive and thrive.
If you need help budgeting or tracking your spending, consider a software program like YNAB, aka You Need a Budget.
3. Decide on a withdrawal amount
A common nugget of retirement advice is that if you withdraw 4 percent of your savings every year — and not more than that amount — from a well-diversified investment portfolio, you can do so without a significant risk that you will run out of money before you run out of life.
At a 4 percent withdrawal rate, a $500,000 nest egg will provide $20,000 in annual income, for example. A $1 million nest egg will double that to $40,000.
Is that enough money for you? If not, you might want to work longer to give your nest egg more time to grow.
But if the figure is close to what you need, Social Security benefits might get you over the hump. Retirement benefit payments averaged $1,413 per month in 2018, according to the Social Security Administration.
4. Figure out how to cut unnecessary costs
If you reach the unsettling conclusion that your income won’t be adequate to cover expenses, look for ways to trim costs.
Fortunately, a handful of important costs are likely to simply disappear during retirement. And if you are clever, you can think of plenty of other places to cut back.
Start by checking out “15 Painless Ways You Can Cut Costs in 2019.”