How to Retire

How to retire? When I retired a few months ago, I was very nervous wondering if I had everything in order. These days things are great! This page describes how I did it so you can have all the steps you need to retire now (assuming you're ready.)

This time last year, I was obsessed with questions like "can I retire now" and "when should I retire."

My primary concern was whether there was enough money, so I did spreadsheet after spreadsheet crunching budget numbers. (see detailed steps)

I tracked our actual spending for a couple of months, and I spent many nights brainstorming what I might be missing in my plan.

I had already read books and articles on the internet to the point that they were not telling me anything new. (see the diary pages)

I had also been preparing my husband for the idea for a couple of years, reminding him periodically that when the mortgage was paid off, I would retire. At the time he didn't take me very seriously, and he wasn't very interested in early retirement at the time. You may be lucky enough to have a spouse who is ready and who plans with you.

So, here are the steps you need to take to retire now, or very soon.

How to Retire: Setup a comprehensive budget plan

Before you set a retirement date, you should have a detailed budget that lists expected spending and expenses. There should be categories for every possible expense you could have. In some months you may not need to buy birthday gifts, but you may need to buy something that costs more than your household maintenance budget, a new weedeater, for example.

The better your budget, the more confidence you will have that you have enough money to cover your needs and wants. If your expenses seem higher than expected, you will have something to work with to find areas you can cut back, or you can decide if you should plan to work part-time.

Review insurance needs

Health insurance coverage is top priority for anyone under age 65. I would suggest you budget for buying your own coverage if you aren't eligible under your employer's retiree benefits. Cobra coverage is too expensive, so shop around if you have to buy your own.

Next, consider long term care coverage, your life insurance needs, and if you're under age 65, you may want to keep disability insurance if you plan to work part-time.

How to Retire: Establish a cash fund

Before you set a retirement date, make sure you have a savings account with a balance equal to 6 times your monthly retirement budget. You won't use this for living expenses, though. This is for emergencies. Unexpected things like if your car is stolen, or you need to visit a sick relative and stay in a hotel for an extended period.

Next, consider setting aside enough cash to cover 2-3 months of living expenses. You may not need to use this money, but in some cases it may take some time to get your portfolio in good order and withdrawals setup properly.

Test your retirement budget plan

As soon as you think your budget is solid, test it. For one or two months, record everything you spend in a spreadsheet. Keep notes in your phone so you won't forget anything.

Of course, exclude anything that doesn't make sense, such as dry cleaning your work clothes that you won't do after you retire. But when you are thinking about it, you may decide that you will need to dry clean occasionally. What category will it go into?

You may think of expenses that you hadn't included yet. Add those to your budget. Another page on calculating retirement needs here

How to Retire: Review the Retirement Checklist

Review the checklist, detailed planning page, and maybe even read a few retirement stories in case they bring something to mind that applies to your life.

Retirement Planning Checklist here.

Set expectations with family members

Before I retired, I made sure to let family members know of my plans. While I was working, I was pretty generous with my parents and my kids, and I felt that they should consider that I may not be able to continue doing that once I retire.

How to Retire: Eliminate Any Near-Term Expenses

If there is anything significant that needs to be done to your house or your car, you may want to take care of those things while you still have a paycheck. Factor those things into your plans when you are thinking about setting a date to retire. But don't let unexpected things affect your plan necessarily.

For example, right before I retired, the tenant in my rental house moved out. I thought "Oh no, how can I retire now?" After I thought about it, I decided that even though that meant I would have less income for a couple of months, it could happen anytime during my retirement, and I had already factored in unexpected events like that. I retired anyway, and the property was only vacant one month.

Retirement Things to Do

Do you have plans for your free time? Do you know what you will do when you don't have to go to the office every day? Spend some time thinking about it AND talking about it with your spouse.

Click here for examples of things to do in retirement.

How to Retire: Retirement Countdown

Once you have thoroughly explored the topics above, and are satisfied that you have covered all your bases, you are ready to start the countdown. Set a date that feels right to you, and then start counting. Savor this time with satisfaction. Be proud of your accomplishment. Go forth, retire, and enjoy your freedom!

Retired Now, A Few More Things

You won't be able to setup your retirement income from a 401k or IRA, etc, until after you quit your job.

After your last day, you will need to engage your financial services company to setup your retirement "paycheck."

You may also need to change your investments to different funds.

If your employer or provider offers it, take advantage of any counseling or advice sessions they provide.

Managing your money is your primary job in retirement.

You might as well get as much education about it as you can.