Your Financial Checkup

Ten steps to take before you retire:

1) Compare Assets Versus Liabilities. Assets include possessions of value, such as cash, real estate and investments. They also include items such as IRAs and, if you’re a homeowner, your home’s current value. Liabilities are debts and legal obligations and can consist of mortgage and car payments, credit card debt, and insurance payments.

2) Pay Down Debt. In a perfect world, aspire to head into retirement with zero debt. Pay off debt with higher interest rates first, and your mortgage last, since that probably has the lowest rate. The lower your debt, the more power you have over building your wealth.

3) Evaluate Life Insurance Needs. Are you under-insured? That depends on individual circumstances. Many experts recommend purchasing life insurance 7 to 10 times your current annual income.

4) Consider Long-Term Care Insurance. Long-term care insurance pays for extended care; it can assist with a comfortable lifestyle without expending retirement savings on medical care. Just like other types of insurance, it varies in price and benefits.

5) Review Your Estate Plan. It’s imperative to possess an updated will, power of attorney, and advanced medical directive. To ensure your wishes are carried out, these documents will provide instructions stating who, what, and when someone is to receive something of yours – all with the least amount paid in fees and taxes.

6) Write A Financial Plan. Sit down with a First United Credit Union professional and plan your retirement goals. Analyze needs versus wants. We’ll help you to list the basics, first. Then you can prioritize luxuries (like hobbies, eating out and travel). And start saving early; financial advisors recommend saving 10 percent of your gross salary for retirement.

7) Prepare Your Retirement Budget. Six months before you retire, calculate your monthly expenses. Realize that some costs may go down, such as food, fuel, and clothes; and others may increase, like medical coverage and travel expenses. Adjust your budget to accommodate for these changes.

8) Decide How You Want To Live During Retirement. Envision the first six months of retired life. What will you be doing? It’s hard to imagine, but many people become bored after they stop work. You may decide to go back to school or start a new career, even on a part-time capacity. Consider interests, leisure, volunteer work, or activities that could impact your retirement funds. Finally, what do you need to flourish and grow? And, how much will it cost?

9) Bolster Cash Reserves. Consider opening a credit line to increase your cash reserves to cover at least six months of living expenses. Most individuals should keep three to six months’ worth of living expenses in an emergency fund. According to U.S. News, you will need an even larger reserve after you retire. If you’re drawing income from retirement funds, keep enough money liquid to cover at least a year’s worth of expenditures.

10) Evaluate Sources Of Income. Review your strategy on what money to tap into first; typically, it’s “non-qualified money,” such as money markets and savings accounts; tax-deferred funds second, like IRAs and 401(k) accounts; and, finally tax-free accounts, like municipal bonds. One of our financial experts can help determine what makes sense. We can also help you to assess your risk tolerance and recommend strategies that will meet income needs during retirement.

Sources: Chicago Tribune; US News Money; eHow Money; (retirement planning);;