If you’re planning to retire soon, check out these steps that will maximize your finances once you've stopped working. Even if you’ve already retired, you may find these steps helpful in reviewing your retirement finances – especially in light of recent economic volatility. If you have a spouse or partner, thinking through these steps together will be beneficial.
1. Define your retirement
Maybe you want to live closer to your children and grandchildren. Maybe you want to write a book. Maybe you want to volunteer in your community. Maybe you want to travel to the other side of the world. Think about the top three activities or goals you want to accomplish, and write them down. If you have some time before you retire, come back to your list periodically to see if these are the same three things you still want to do.
2. Figure out your assets and projected income
Now you need to figure out what your assets are and what your projected income will be. Your IRA, 401(k), cash savings, and Social Security are all potential sources of income. As a Patelco member, you have complimentary access to CFS Financial Advisor* at your local Patelco branch. They can help you figure out how your assets will translate into income once you retire.
3. Decide when to take Social Security
Speaking of income, the age at which you choose to begin collecting Social Security has a direct impact on how much you can expect to receive. In general, the longer you wait to begin collecting Social Security, the greater benefit you’ll experience. There are Social Security calculators online that you can use to figure out how much you’ll receive based on when you choose to begin receiving benefits. Additionally, talking to a CFS Financial Advisor* at your local Patelco branch or your tax advisor can also be helpful in making this decision.
4. Create your retirement budget
Once you’ve settled on what you want to do in retirement, you need to figure out the expenses that will be associated with meeting those goals and doing those activities. If you’re planning to remain in your community and stop working, you can look at your existing expenses and probably plan to spend less on things like commuting. If you want to volunteer or do some other work after retirement, monthly expenses like gas and car insurance may stay the same for you. If you want to travel or move, take those expenses into account.
In addition to accounting for your expenses, you also need to account for paying for how much debt you have.
5. Decide if you still need or want to work
Now it’s time to compare your budget from step four with your income from step two. Once you’ve compared these, you’ll know if you need (or want) to continue working. Or you may decide you need to change your retirement plans so that you can create a budget that’s more in line with your projected income.
"Work" means different things to different people in retirement. For some, it means working part time purely to supplement income so they can meet their goals or live a particular kind of lifestyle. For others it means doing something unpaid (or at low pay) because they enjoy it – like being a museum docent or other volunteer.
You'll have to decide how much time you want (or need) to spend at a job and balance that with your goals. If you don’t want to work at all, make sure your budget can support your lifestyle. In any case, don't wait until after retirement to make the decision about working – the sooner you decide, the easier it will be to plan.
* We want to remind you that non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members.