5 Financial Questions that You Must Ask Before Retiring

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Retirement can be an enjoyable time in your life. But if you truly want to enjoy it, you need to make sure that your finances are in order so that you don’t have to worry about how you’ll pay for basic expenses like shelter, food, and healthcare. Taking the time to make a plan to help you thrive instead of merely surviving during retirement can make all the difference in how you spend your golden years. Here are five financial questions to ask before retiring.

1. Do I Have Enough to Retire Comfortably?

Before you think about retirement, consider whether you have enough money saved to retire comfortably. Will your money last you for the rest of your life? If not, consider calculating your life expectancy so that you know whether the money you have in your retirement accounts will be enough to last you. Consider what income streams you have (i.e., rental property, dividend stocks, businesses, etc.) and find out how much Social Security you’ll be able to collect. Add up all of your expenses and your income and determine whether you’ll have enough to live off during your retirement years.

2. Should I Sell My Home or Move?

If you don’t think you’ll have enough money or income to retire on, ask yourself whether you should cut down on expenses. For example, if you’re living in a large house, downsizing to a smaller house or an apartment might be a good idea. Selling your home while the market is healthy could provide you with the excess cash you need to retire with more money in the bank. Other benefits of selling your home when you retire include tax breaks and fewer maintenance costs. If your equity is low or the market isn’t healthy, however, you might not benefit from selling your home.

3. Do I Have Adequate Health Insurance?

Having adequate health insurance is one of the many overlooked aspects of retiring comfortably, and turning 65 means considering Medicare as an option for health insurance by researching your options when it comes to plans, pricing, and eligibility. If you’re already receiving Social Security benefits, you’ll be automatically enrolled in Medicare. But if not, you’ll need to apply on your own, and it helps to know when you can enroll and how to do so. Think about things like whether you’ll want Original Medicare (Parts A and B) or a Part C, also known as a Medicare Advantage Plan (parts A, B, and usually D, which provides medication coverage).

4. How Will Taxes Impact my Income?

Withdrawing money from your traditional IRA or 401(k) usually comes with a federal income tax (and sometimes a state tax). But what some people don’t know is that you’ll also be taxed on your Social Security income (up to 85 percent of it) and any investment income you have yearly. Pension income and annuity distributions (depending on the type of annuity you have) are also taxed, so it’s best to factor in your estimated taxes when you’re trying to determine your income and expenses to figure out whether you’ll be able to live on your retirement income.

5. Should I Hire a Financial Planner or Lawyer?

Hiring a financial planner might be the right move for you if you’re feeling overwhelmed about managing your finances during retirement. If you want to create an estate plan and a will before you retire, hiring a financial planner (or accountant) and a lawyer is undoubtedly the best way to go to ensure that your assets are correctly transferred to your heirs.

A financial planner can also help you minimize your estate taxes and help you find a cost-effective way to deliver your estate to your beneficiaries after you pass away. Start looking for a financial planner and a lawyer before you retire so that you can take care of your estate planning and your will as soon as possible.

Planning Ahead

Asking yourself the questions above can help you determine what the right moves are for you before and during retirement. Deciding whether to sell your home, get Medicare, or hire a financial planner and determining your income and taxes can help you prepare for retirement ahead of time.

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