Six financial steps you MUST complete before retirement
Retirement anxiety is one of the most common financial fears people face, and it often stems from uncertainty about whether they’ve prepared adequately. Many workers find themselves postponing retirement simply because they’re unsure if their savings will last, while others rush into it without proper planning and face financial stress later.
Fred Harrington, a finance expert at Vetted Prop Firms, a trusted online platform that helps traders navigate financial markets, knows exactly what steps people need to take before they retire. The difference between a stressful retirement and a comfortable one often comes down to the preparation you do in the years leading up to it, he explains.
To help you, Harrington shares six important financial moves that can help you retire with confidence rather than worry.
Six financial steps you MUST complete before retirement
1. Pay Off High-Interest Debt
Start by tackling credit cards, personal loans, and any other high-interest debt that’s eating away at your monthly budget. This debt doesn’t disappear when you retire – it just becomes harder to manage on a fixed income.
High-interest debt is like a leak in your retirement bucket. Every dollar you’re paying in interest is a dollar that can’t work for your future.
Focus on debts with interest rates above 6-7% first. Once these are gone, you’ll free up money that can either boost your retirement savings or reduce the income you’ll need in retirement.
2. Maximise Your Pension Contributions
Take advantage of catch-up contributions if you’re over 50. Retirement accounts usually allow extra contributions for older workers, and your employer might match some of these funds, which is essentially free money.
If your employer offers matching contributions and you’re not taking full advantage, you’re leaving money on the table. It’s one of the few guaranteed returns you’ll find in investing.
Review your current contribution levels and increase them gradually if possible. Even small bumps in contributions can make a significant difference over time thanks to compound interest.
3. Build An Emergency Fund Separate From Retirement Savings
Your retirement accounts shouldn’t be your emergency fund. Create a separate savings account with 6-12 months of expenses that you can access without penalties or tax consequences.
I’ve seen too many people raid their retirement accounts for emergencies, which creates a double hit – penalties plus taxes. A separate emergency fund protects your retirement investments from market downturns and unexpected expenses.
This fund acts as a buffer for medical bills, home repairs, or other surprises without derailing your retirement plans.
4. Review And Consolidate Your Retirement Accounts
If you’ve changed jobs several times, you probably have multiple 401(k)s or pension accounts scattered around. Track them down and consider consolidating them into fewer accounts.
People often forget about old workplace accounts, but that money is still yours. Consolidating makes it easier to manage your investments, reduces fees, and gives you a clearer picture of your total retirement savings.
You’ll also have better control over your asset allocation across all accounts, making it easier to balance risk and growth.
5. Recalculate Your Retirement Income Needs
Don’t rely on old estimates of how much you’ll need in retirement. Sit down and calculate your actual expected expenses based on your current lifestyle and future plans.
Too many people use outdated rules of thumb like needing 70% of their pre-retirement income, but that’s not always accurate. Your actual needs depend on your specific situation – whether you’ll have a mortgage, your health, and your lifestyle plans.
Consider factors like healthcare costs, inflation, and travel or hobby expenses. Being realistic about these costs now prevents unpleasant surprises later.
6. Review Long-Term Care And Life Insurance Policies
Healthcare costs can devastate retirement savings, and state-provided healthcare doesn’t cover everything. Look into long-term care insurance while you’re still healthy and employed – it’s much cheaper than paying out of pocket later.
Long-term care insurance is like car insurance: you hope you never need it, but if you do, it can save you financially. The key is getting it while you’re still healthy, because once you have health issues, it becomes much more expensive or even unavailable.
Also review your life insurance needs. You might need less coverage once you retire, or you might want to keep some to cover final expenses and leave something for your family.
Make sure you plan for your retirement early enough
The biggest mistake I see people make is waiting until they’re six months from retirement to start planning seriously. By then, your options are limited and you’re often stuck with whatever financial situation you’ve created. The people who retire comfortably are the ones who started ticking these boxes five to ten years before they planned to stop working.
Another common error is being too conservative with retirement planning. People get scared and either don’t save enough or they put everything in low-yield accounts that don’t keep up with inflation. Yes, you want to be careful with your money, but you also need it to grow enough to support you for potentially 20 or 30 years of retirement.
I also see people who assume government pension schemes will cover more than they actually do, or they don’t account for healthcare costs properly. If you start planning now, you can avoid that last-minute financial panic.
Vetted Prop Firms is a trusted online platform dedicated to helping traders navigate the complex world of proprietary trading firms. It offers in-depth, data-driven reviews and rankings of prop firms across markets like forex, crypto, and futures, highlighting key metrics such as account sizes, profit splits, challenge requirements, payout reliability, and platform performance.
