retirement

10 things to do before you retire

Retirement signals the beginning of a new lifestyle. Long before you clock out for the last time, consider whether you are financially ready to pursue the life that you envision for yourself.

Do you want to travel every year? Are you planning to spend more time in your garden, or do you want to downsize your lot? Are you properly insured?

Just as you would plan for a trip, it's even more important that you plan for retirement -- the longest vacation of your life -- with eyes wide open.

Considerations
Here is a checklist of considerations you should revisit as often as necessary before taking the retirement plunge.
10 steps to a worry-free retirement:
  1. Prepare a balance sheet
  2. Get rid of debt
  3. Conduct a house check
  4. Assess life insurance needs
  5. Think about long-term care insurance
  6. Consider variable annuities
  7. Oversee estate planning
  8. Ditch college expenses
  9. Look at the big picture with a planner
  10. Prepare a budget

Prepare a balance sheet. Certified Financial Planner Bob FitzSimmons, who runs a firm in Lincoln, Neb., recommends preparing a balance sheet showing your assets and liabilities to determine your net worth. Assets include personal possessions of value, such as cash, real estate and investments. Liabilities are your debts and legal obligations. You can prepare your balance sheet on an Excel spreadsheet, a notepad with columns or Bankrate's net worth work sheet.

Get rid of debt. Head into retirement with no debt on the balance sheet. "That's the ideal world. It's psychologically the most comforting," says FitzSimmons. If you have debt, and retirement is on the horizon, go after the debts with the highest interest rates first. "You shouldn't go into retirement with excessive credit card debt," says FitzSimmons. Credit cards usually have the highest interest rates, with car loans generally coming in second. Rates on home equity loans are a little higher than for a mortgage. Pay off the mortgage last because it presumably has the lowest interest rate.

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Planners generally advise that you look at the effective rate on your mortgage (which takes the mortgage interest deduction and real estate taxes into account) versus the after-tax yield on what you could earn with the money you would otherwise use to pay off your mortgage. In retirement, however, you don't have employment income but savings to use to pay the mortgage. Tapping into retirement accounts could have serious tax consequences. Bankrate's story, " Keep the mortgage or pay off the house," sheds light on this subject.

Conduct a house check. If remodeling takes place pre-retirement, think about future needs. Barbara Krueger, a senior housing marketing specialist in Del Mar, Calif., and founder of www.seniorresource.com, recommends doorknobs and faucets with lever handles that are easier to maneuver. Consider installing a shower with a low threshold and a shower seat.

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