Separator ImageSeparator Image

Life Stages & Events

Nearing Retirement:
How to Prepare Financially

Will you be retiring soon? Couples nearing retirement can avoid future money worries by reviewing credit activity and making adjustments to budgets and investments now instead of waiting until retirement begins.

Prepare for Retirement

If you plan well, retirement can be worry-free when you can relax and enjoy time with loved ones, participate in your favorite activities and hobbies, and explore new interests. The last of the major financial life stages, for most people, nearing retirement means you'll be living on a fixed income, and some find this difficult to adjust to. By slowly introducing changes in spending and investments, as well as reviewing your credit activity, soon-to-be retirees can ease into the financial adjustment required for retirement and rest easy knowing their finances are in order.

Budget adjustments

The first thing that may come to mind when you hear the word retirement is "life on a fixed income," especially if you're prone to worrying about money. If you've been accustomed to spending freely for most of your working life, it can be difficult to get used to life on a budget. You may get accustomed to life on a retirement budget by practicing for a year or two before you (or your spouse) actually retires. Estimate the amount you'll live on in retirement. In addition to your pension and investment earnings, make sure to account for your reduction in spending. Perhaps you won't need a work wardrobe, a second car (and the gas to fill it) or money for daily lunches and coffee breaks. Once you have an idea of your retirement income and spending needs, try to live within the budget and make adjustments as needed.

Understanding your credit is crucial.

So is a good score.

Get your Credit Report and Score.

Learn More

Credit review

As you prepare to move into the retirement financial stage, it's also a good idea to review your credit report to make sure the information there is accurate and up to date. Confirm that credit accounts you've paid off are showing as paid in full or even closed if this was your request. Do you have inactive credit card accounts showing up on your credit report? If so, consider closing them to avoid potential fraudulent activity.

Investment rebalancing

When was the last time you sat down with your investment advisor? Don't wait until you're already retired to review your investments. As you are nearing retirement, your portfolio might need to be rebalanced to reduce the higher-risk equity portions and increase the lower-risk fixed income portion, since you may soon depend on investment withdrawals as part of your retirement income. Many investment advisors will gradually rebalance your portfolio yearly to reduce the risk of losing your investments as you get closer to retirement, but you should review your investments regularly to ensure your portfolio is reasonably balanced. If not, you run the risk of having to sell off your equity investments to purchase fixed income investments at a time when the market may be low, resulting in lost investment earnings.

Receive your Credit Report and Score

Now that you know more about how to financially prepare for your retirement,
get your Credit Report and Score.

Get your Credit Report & Score.
Terms and Conditions apply.
This information is for educational purposes only and does not constitute legal or financial advice. You should always seek the advice of a legal or financial professional before making legal or financial decisions.
Related Articles
Plan Financial Management Reviews at Each Life Stage
Cheapest Places to Retire
What is a Reverse Mortgage?