Retirement planning isn’t an overnight process. It can take years to plan financially and mentally ahead of retirement. Not everyone has children who can help with planning their finances in their late years. So, it is essential to have a clear roadmap to follow before elderliness catches up with you. Here are crucial steps that a childless couple or someone entering retirement solo can take to prepare for their late years.
Draft a Will
It is crucial for someone entering retirement solo to detail their wishes for their pets’ guardianship, burial arrangements, and distribution of their wealth. Those are the wishes that guide the attorney when determining who should inherit your property. However, first, take time to understand the rules of drafting a will in your state. Check whether your state approves handwritten wills or not. Other states may require you to have some witnesses before a will is approved. Also, be sure to ask a trusted friend or relative to serve as the executor of your final wishes to avoid conflicts in the future.
Assigning Power of Attorney
Retirees who can’t decide on their own can ensure their finances are managed according to their wishes by assigning a power of attorney. The person you assign a power of attorney is responsible for managing your wealth when you become incapacitated. However, be sure to pick a trustworthy person who has your best interests at heart when assigning a power of attorney. It can be your child or spouse if you are married. You can also appoint a bank or a revocable trust as your trustee. Your trustee will have the authority to sell or maintain your home, file insurance, and pay bills on your behalf when you cannot do so.
Plan for Your Nursing Care
Retirement homes can be quite expensive for a retiree in need of nursing care. Enrolling for Medicaid can help reduce the cost of long-term nursing care. However, you will be required to invest in a Medicaid program first. Be sure to consider the cost of nursing homes when calculating the amount to save for your retirement. You may consider getting long-term insurance for you and your spouse if the amount you saved for retirement isn’t enough to cover the cost of a nursing home. Medicare programs often don’t cover the cost of health care, so it might be prudent to get long-term care insurance. You can cut the cost by obtaining a hybrid policy that includes both life insurance and long-term care coverage. A hybrid policy will cover your long-term care needs and allow you to leave a death benefit for your beneficiaries.
Appoint a Medical Proxy
It involves giving legal authority to someone who can make decisions regarding your health when you are deemed incapacitated. It can include deciding whether to take you into a nursing facility or out of the hospital. So, be careful when naming your medical proxy. A relative, child, or spouse could be an obvious choice. But be sure to have a backup medical proxy in case the primary one dies before you. A friend or trusted relative can fill the role of a backup proxy if you don’t have a spouse or children.
Draft a Living Will
A living will is a legal document containing details of the type of medical care you would wish when you are in dire situations. For example, you can indicate on your living will that you won’t want to linger on life support when your health deteriorates. A living will is similar to a testament or last will. So, you will need to familiarize yourself with your state laws before drafting a living will. However, be sure to share copies of your will with the person responsible for making healthcare decisions on your behalf and your doctors.
Downsize Your Debt
Accelerating loan repayment can help downsize your debts before you retire. Also, considering cash payment for major purchases can help avoid unnecessary credit card debts. By accelerating your mortgage payment and limiting credit card debt, you reduce the debts that will be settled with your retirement income.
Diversify Your Investments
People are often tempted to avoid stocks to reduce risks. However, the growth that stocks and bonds provide can be worth it at the prime stage of your life. But make sure your investments fit your liquidity needs, time horizon, and risk tolerance. It is crucial to examine your income sources ahead of retirement so that you can adjust your retirement plans when necessary. Maintaining a well-balanced portfolio can help generate enough income to cover your retirement expense for up to three decades. Fortunately, several online tools can help determine whether your portfolio aligns with your retirement goals or not. However, it is worth noting that diversification doesn’t protect against risk or guarantee a profit.
You will, at one point, have to retire after decades of hard work and saving. The best time to plan for your retirement is now. Planning for retirement will ensure that you have all it takes to enjoy a happy and fulfilling retirement. Examining your income sources ahead of your retirement will allow you ample time to make any necessary adjustments to your retirement plan. Planning for retirement starts with envisioning the lifestyle you would want once you retire. Your wish could be to travel, volunteer, or work part-time. Either way, develop a realistic plan of your income sources and determine if the current ones can sustain your retirement plan.
If your retirement plan has a gap, consider adjusting your vision to match your requirements. Analyzing your current expenses will allow you to reduce or eliminate any discretionary items in your retirement plan. Look at your monthly expenses and determine what to cut back to invest more in your retirement plan. Whenever possible, aim to put enough money into your retirement plan. Maximizing your contribution to a retirement plan can increase your chances of qualifying for attractive compensation benefits from your employer.