After 30 or 40 years in the workforce, the idea of actually walking away from your job for good can be a bit overwhelming. That may be part of the reason why many workers plan to put if off for as long as possible.
More than a quarter of workers now say that they’re going to work past age 70, and 10 percent say that they don’t ever want to retire, according to an April study by the Employee Benefit Research Institute.
Even if you’re not planning to leave the workforce, if you’re in your late 50s or older you may want to start putting an exit strategy in place. Nearly half of all employees are forced to leave the workforce before they’re ready, due largely to health problems or layoffs. The median age to retire in America is still 62, which hasn’t changed in more than 20 years.
Related: The Best States for Retirement 2016
Taking some proactive steps to prepare for retirement before you’ve actually stopped working can make your retirement go much more smoothly.
Here are eight things you need to do to get ready for retirement:
1. Max out your retirement savings. Thanks to catch-up contribution limits, Americans age 50 and older can stash up to $24,000 in their 401(k) accounts this year, and the limits may go up in 2017. On top of that, you can put an additional $6,500 into an IRA. If you earn more than $71,000 (or $118,000 for couples filing jointly), you may not be able to deduct the IRA contributions, but they’ll still be able to grow tax-free.
2. Meet with a planner. Your retirement plan probably assumes that you’ll live on some fixed amount of your portfolio every year. But you may need professional help getting all the assumptions right. (Be careful with the many free, online retirement calculators; a recent study found that they offer results that are misleading or wrong.) In particular, a planner can help make sure that you’re properly accounting for the effect that inflation and taxes can have on even a sizeable nest egg. “Inflation is insidious,” says Kathleen Hastings, a certified financial planner and a portfolio manager with FBB Capital Partners. “Especially if you’re retiring early, inflation can really erode your portfolio over many years of compounding.”
3. Consider putting it off a little bit longer. Run the numbers, preferably with the help of a financial planner, to make sure that your nest egg, pension and Social Security have a good chance of lasting through your retirement. If you’re cutting it close, working even just one additional year may make a huge difference, since you’ll have one less year of withdrawals and one more year of savings.
Related: 12 Amazing Places to Retire Abroad in 2016
Now’s also a great time to start thinking about your second act, or what you’ll do after you quit your full-time job. Learning a new skill now could lead to a part-time gig and the option to put off tapping Social Security or some of your retirement funds.
4. Put a year of cash into a liquid account. Most working Americans aim to have three to six months’ worth of expenses in an emergency account, but retirees should have more. That money can help you out in the case of an emergency, of course, but it can also provide a source of income for you if the stock market tanks (which it inevitably will at some point in your retirement). That way you’re not forced to sell stocks at a loss during a down year to cover basic living expenses.
5. Cut off your kids. It’s become increasingly common for adults to rely on their parents for financial assistance well into their 20s and 30s. If providing such support is affecting your ability to meet your own retirement savings goals, it’s time to set boundaries. Both you and your kids will be better off in the long run.
6. Have a plan for health care. If you’re retiring before age 65, you won’t have access to Medicare. It’s becoming far less common for employers to give retirees health care, so you’ll need to purchase a plan on your own in the intervening years. Obamacare has made it much easier to do that, and you can purchase a plan directly from the exchanges. Open enrollment is typically in the fall, but retiring counts as a qualified event that will allow you to purchase insurance whenever your current coverage runs out.
Related: 5 Easy Ways to Jumpstart Your Retirement Savings
Even if you’re able to get Medicare, you’ll want to make sure you’ve set aside enough money to cover your out-of-pocket costs. In 2015, a 65-year-old couple would need $244,000 in savings to cover all of their health care costs in retirement, not including long-term care, according to EBRI.
7. Consider long-term care expenses. There’s a 70 percent chance that you’ll need some type of long-term care, but many pre-retirees don’t factor these costs into their retirement plans. Hiring a home aid can run more than $3,000 a month, and a stay in a nursing home can be twice that. If you don’t have enough cash on hand to cover these costs, you should seriously consider long-term care insurance.
8. Think about how you’ll spend your days. One of the biggest issues that new retirees run into is having trouble filling their days with meaningful activities. It’s tough to go from having to be someplace every single day for decades to having no commitments at all. In addition to hobbies, consider part-time work or a volunteer gig, and do some work now laying the groundwork for that role. “A lot of retirees go through the first year floating around feeling like they don’t have anywhere to go and they don’t know what they’re going to do,” says Katie Libbe, vice president of consumer insights at Allianz Life.
