by Gary Foreman

Don’t retire unprepared. Do these 8 things in the 4 years before you retire. These tools can help ensure you achieve your desired retirement.

It’s almost here! After decades of work, you’ll be retiring within the next 4 years. Congratulations! You’ve earned it!

But you know that there are some final steps that you need to take before you retire. Let’s look at those tasks and see if we can’t find some resources to help you towards the retirement lifestyle you’ve dreamed about!

Choose a Retirement Lifestyle

Each stage of life has brought unique challenges and opportunities. Retirement is no different. You’ll be entering a very different stage of your life. How much you enjoy it depends largely on how well you’ve prepared for it.

A major question for all retirees is how do you want to spend your time. Will you travel? Throw yourself into a hobby? Try something that you’ve never done before? The choices are endless. At least if you have the finances to support your wish list.

So now is the time to get serious about your plans. Including decisions about where you’ll live, if you will still work part-time, etc. Anything that can affect your income and expenses.

Unless you’re currently spending a lot of time with retirees, chances are that some lifestyle changes will catch you by surprise. That’s one reason why we encourage you to Subscribe to After 50 Finances, our free weekly email newsletter. Each issue includes articles on various lifestyle and financial issues you’ll face in retirement. You’ll want to learn more before making important lifestyle choices!

Estimate Your Retirement Expenses

Once you’ve had time to consider your new retired lifestyle, you’ll need to estimate what that lifestyle will cost.

You can begin by looking at your current monthly expenses and lifestyle plan. Note any that will disappear or be reduced when you retire. Housing, transportation, work-related meals, etc. will all change. Estimate how much less you’ll spend.

Then take a second look at your current expenses and lifestyle choices to see which expenses will increase or be added to your monthly budget. Items like travel and hobbies are often on the list. Additional help around the house for chores you cannot do may be needed.

And don’t forget medical expenses. Medicare does not cover all your medical bills. You’ll probably buy a Medicare supplemental insurance plan. You might even choose to buy long-term care insurance.

Estimate Your Retirement Income

Naturally retiring will mean changes to your income. Both to the amount you have coming in and where the money comes from.

Unless you have a variety of current sources of income, the simplest way to estimate your retirement income is to list the sources and how much each one is likely to provide.

Most of us will expect to collect Social Security. Some will have work-related pensions. Hopefully, you have some money set aside in general and retirement savings accounts (IRAs, 401Ks, etc). Others may have rental or other passive income. And some of us will choose to work part-time or set up a hobby-based income.

You’ll want to have a pretty good idea of how much you’ll receive from Social Security. Most of us can’t make a good guesstimate. The Social Security website has an estimator that’s useful. It’ll be helpful to know how much you made last year before you go to the site.

Next estimate income from other sources. If you have a pension the administrator should be able to tell you what you’ll receive.

There’s currently a controversy over how much you can afford to take each year from your savings and retirement accounts without running out of money. Traditionally 4% of the invested total each year was used. That’s probably good enough for planning purposes today.

Don’t forget to include any possible other earnings. You may choose to work part-time. Or you might turn a hobby into a part-time business. It may take a little research to estimate your earnings. Don’t worry about being too precise. You just want a reasonable estimate of earnings.

Next, total all of these sources of income to see how much you’ll have available to you each month. Don’t forget to reduce by any income taxes you’ll pay.

Decide When You’ll Begin Taking Social Security

There’s a good chance that Social Security will be a big source of your retirement income. And, unlike your current employer, you can choose to get an 8% annual pay increase. That is if you decide to delay collecting Social Security.

When to begin taking Social Security is one of the most important and critical decisions you’ll make. Begin too early and you could be locked into a too-small income. Wait too long and pass on before you’ve collected all the money you contributed over the decades.

Unfortunately, there’s no simple formula that can tell you when to start collecting Social Security. However, we do have a few articles that outline what factors you should consider:

• When To Begin Taking Social Security Distributions
• 2 Reasons to Collect Social Security Benefits As Soon As Possible
• Factors To Determine the Best Retirement Age for You

Get Out of Debt Before You Retire

If you’ve been in debt (mortgage, car loans, student loans, credit cards, etc.) for most of your adult life it’s hard to even think about being debt-free. And maybe it’s not possible to pay off all your debts before you retire.

But it’s important to reduce the amount you owe as much as possible while you’re still collecting a paycheck.

If you think it’s hard making payments now, it’ll be that much harder when you’re living on retirement income. That’s why you want to do what you can now to lower your payments after you retire.

Credit card debt can be especially frustrating. It’s hard to reduce the balance and payment when you’re paying interest in the mid-teens.

If you owe less than $7,500 and have a good credit rating you’ll want to consider a balance transfer credit card. Getting a lower rate or even a few months without interest can go a long way to reducing what you owe.

If you owe more than $7,500 on your credit cards, you should consider credit counseling. A credit counselor can arrange for a lower interest rate for you. Talk to more than one before you decide who to use. Their programs may all be similar, but some differences can be important.

If you have a variety of debts and don’t know where to start, you’ll want to get How to Conquer Debt No Matter How Much You Have. It’s an ebook we created that will help you create a get out of debt plan that’s tailored to your unique needs.

It may be tempting to just continue on your current path. But remember that your income will be less once you retire. And the money that goes to repaying debts is money that can’t pay for groceries or trips to see the grands.

Related: Could Debt Derail Your Retirement? A Checklist

Save All You Can

You may not have saved as much as you should, but there’s still time for a last-minute push. According to some, by age 60 you should have saved 8 times your annual salary. Most of us fall short.

One way to boost your savings is to take advantage of ‘catch-up clauses’ in your retirement plan. They’ll allow you to put more into your retirement accounts in the last years you work. They’re designed for people 50+ and allow you to add thousands of dollars more than the normal maximum. You’ll have more saved when you retire and a lower tax bill this year!

Now may be the time to find a little extra income. A part-time job could be just the solution. Giving up your spare time might not be your first choice, but would you rather work part-time now or be forced to work part-time 10 years from now?

Complete Your Estate Planning

Most of us don’t like to think about end of life and disability planning. But we must. Especially if we’re over 60. You need to have a will, appropriate medical directives, and a power of attorney.

These documents can be legally complicated. It’s best to have a lawyer prepare them. But if you don’t have the money or simply want to do it yourself, at least consider Nolo’s estate planning bundle. They can provide you with the necessary forms, books, and software for wills and living trusts.

Prepare a Financial Bucket List

You may have already thought about a bucket list with all the things you want to do after retirement. But now in the four years before you retire it’s time to complete your financial bucket list.

Here are a few to get you started:

• 401k Retirement Distribution Rules and Options
• Where Will You Live When You Retire?
• Preparing for Surprises After You Retire
• Commonly Overlooked Retirement Expenses

Reviewed June 2023

About the Author

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.