After decades of hard work, retirement can be a blissful time, but without a little organization, it can also be overwhelming.
Retirement Tip of the Week: Before you get too far into your retirement, make sense of your assets, your spending and have an easy way to adjust when necessary – if you’re already retired, don’t waste any more time.
The first thing to do is make a list of what retirement or other financial accounts you have – list the investment firm or bank, the balance, and if you can, have an idea of how that money is invested, if it is. If you’re married, make columns for what’s under each person’s name, or where accounts may be joint.
Separately, have a budget – even if it’s only a rough estimate – of what you will be spending in retirement, including housing, utilities, groceries, entertainment, medicine, gifts, taxes and so on. You may not follow a budget religiously, but having a mock up of what your expenses are will make understanding your personal cash flow a lot easier later in life.
Want more actionable tips for your retirement savings journey? Read MarketWatch’s ‘Retirement Hacks‘ column
If you are feeling ambitious, make yourself a net worth statement, which lists all of your assets (including your house, your car, any stocks or valuables) and your liabilities (including a mortgage, auto loan, student loan or so on). You subtract your liabilities from your assets to get your total net worth – here’s one way to calculate that.
While putting everything together, you may remember accounts you had completely forgotten about, such as a 401(k) from an employer you were with for only a few years, or a pension benefit you may be eligible for based on the company’s requirements.
You might also want to consider consolidating your retirement accounts after reviewing your assets. Too many accounts can be confusing, but don’t consolidate for that reason alone. Balance the convenience of one account with other considerations, such as the balance in each account, the high or low fees within these plans, as well as investment options available (not all 401(k) and IRA plans are created equally – the great investment choices you have access to at Company A won’t necessarily be available in a rollover IRA).
There’s no one right way to organize your documents – everyone has a different method they prefer. But try to have this figured out as soon as possible, and keep it in a safe, secure location. Some people choose to store this information in an encrypted folder on their computer desktop, while others prefer a binder. Tell a trusted individual where to find these documents and how to access it, so that in the event of an emergency, so your wishes are met and your finances remain in order.
And while you’re at it organizing your finances, check that you have other pertinent documents in place, such as a power of attorney, healthcare proxy and will.