As Liz Pulliam Weston says in her excellent roundup of retirement-readiness tips, "Be sure that you've taken care of these details. You could save yourself a whole lot of money and regret later."
Doing her lengthy to-do list can't hurt, but here are five essential steps that you really shouldn't overlook:
Figure out whether you will have more money coming in than going out, especially when accounting for inflation.
Inflation is a retiree's worst enemy. Think about this: In 20 years, if there is 3% annual inflation, a conservative average for the last few decades, the cost of living will have doubled. While Social Security is indexed for inflation, most pensions aren't. The easiest way to figure out whether you have enough money to actually pull the plug on work is to use one of these inflation-adjusting calculators:
- Really sophisticated analysis: T.Rowe Price retirement income calculator
- Less sophisticated but easy to use: AARP retirement calculator
- The simplest of all: MSN/Liz Pulliam Weston retirement calculator
For most people, Social Security will cover most of the bills. The program has some twists and turns, so figuring out how to get the most out of it isn't necessarily a slam dunk. The Center for Retirement Research offers an excellent (and free) Social Security Claiming Guide. These ideas from Prudential Financial for maximizing Social Security are more complex, but smart.
Figure out what Medicare will mean for you
And decide what other kinds of insurance you'll need. How much you'll pay for Medicare and its supplements and whether it makes sense to buy long-term care insurance is a very individual decision. Making it requires understanding your own financial situation. Fidelity Investments estimated earlier this year that a couple will need $250,000 throughout retirement to pay for Medicare and things it doesn't cover. But this calculation is based on the idea that you won't be getting any extra government or Veteran's Administration or other assistance for low-income people. Some of these programs can make a big difference, so try this calculator from the National Council on Aging and see if you might qualify for help.
Take a hard look at your debt
Mortgage and credit-card debt can sandbag your retirement. The best way to handle it is to knuckle down and pay it off -- before you retire. Especially credit card debt. As this WalletPop story by Martha C. White points out, credit card debt is the biggest reason why retirees are forced to declare bankruptcy.
Make a plan for living the best way you can
You're only going this way once and time speeds by more rapidly the older you get. Helping your kids and grandkids, giving to good causes and compromising with your spouse on how things will be are all important, but in the end, you've got to figure out what keeps you secure, healthy and enjoying life.