6 Ways to Simplify Your Financial Life before Retirement

Taking steps to simplify your financial life now—before you head into retirement—might just be one of the best things you do for your future self.

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Our financial lives can be complex. There are taxes to consider, healthcare to plan for, Social Security to understand, multiple income streams to juggle, the list goes on. Overlooking one of these elements can have a major effect on your future—as well as the future of the next generation. Taking steps to simplify your financial life now—before you head into retirement—might just be one of the best things you do for your future self.

In my experience as a financial advisor, there are six ways you can simplify your finances before retirement.

1. Work with a financial advisor

Chances are, your financial picture will look different at retirement than it did when you were younger. You may have more debts to pay off, more accounts to keep track of, more taxes to mitigate or more goals to reach. Managing all of these moving pieces can get overwhelming—especially if you don’t have a degree in finance.

That’s where a financial advisor comes in.

The right financial advisor can help you bring all the moving pieces of your financial puzzle into clear view. A financial advisor can help you chart a path to reach your long-term goals and implement a system for reviewing your progress along the way.

If a question does come up, a financial advisor should act as your sounding board when you aren’t sure what to do next. A financial advisor should also be able to coordinate with the other professionals on your financial team, be it an estate planning attorney, an accountant or a CPA, so you get the best advice possible for your situation and nothing falls through the cracks.

2. Automate bills, savings, investments and more

If there’s one great thing about today’s digital age, it’s the ability to automate pretty much everything. You no longer have to wonder whether you’ve paid this month’s electric bill, moved money to your savings account or remembered to fund your investments. This can all be set up to happen for you.

If you haven’t done so already, take time to set up automatic payments for your bills and set up a workflow that reroutes a portion of your paycheck to savings and investments. Automating your savings routine also eliminates your ability to skip a payment or retirement contribution when you feel like you could spend it somewhere else. Parting ways with your hard-earned money, even if it’s for you to spend later on down the road, can be a struggle. When the money is rerouted automatically, you may not even know the money is gone.

3. Pay off your debts

Debt costs money. You may think you’re getting a good deal on a particular purchase, but when that purchase is charged, don’t forget about what you’re paying in interest and late fees.

When you carry debt into retirement, that’s one more expense to account for in your retirement savings. If you don’t need as much to cover your expenses in retirement, you don’t have to save as much, of course, so one of the best things you can do as you prepare for retirement is to get rid of as much debt as you can.

Paying off debt before retirement not only means you’ll have fewer obligations laying claim to your income once you do retire, but if you have a credit card balance accumulating interest at 14%, every dollar you pay off is effectively earning a 14% return. That’s a lot more than even the best investors can expect to make in the stock market. If you can divert those funds toward actual investments in your retirement accounts, you may even be able to compound that money through a company match.

4. Focus on your long-term goals

A mistake that many people make when planning for the future is not being specific enough with their retirement goals. Sure, you may want to be able to maintain your lifestyle in retirement, for example, but it’s important to drill down and get to the heart of what that really means. A well-thought-out goal looks something like this: “I will have X amount of dollars at the time of retirement, so I have X amount to spend on a monthly basis.”

Your goals are uniquely yours, and your money can be used as a tool to help you achieve them, but it’s important to think about what each goal really entails. So, make sure you’re considering factors such as inflation.

5. Tune out the noise

The world is full of information—some solicited and some not. Turn on the TV or go online and you can quickly become bombarded with “experts” telling you what to do (and not do) with your money. The flow of information seemingly never stops, and if you’re not careful, this constant barrage of information can clutter your mind and leave you confused.

Simplify your financial life by tuning out this noise. Limit the amount of information you expose yourself to. Establish a long-term relationship with a financial advisor you trust. Know who to turn to if you have questions or concerns. If you hear about a “hot” opportunity or worry in the market, ask about it. Many people are amazed at how much calmer life can feel when you have the right people there to support you.

6. Make a plan before retirement

A lot of people assume that life will slow down in retirement, but as you start traveling, spending time with family and working on passion projects you couldn’t do while working, the opposite is often true. And if you do happen to have more time, who wants to spend it worrying about money? Planning ahead can have a major effect in helping you simplify your life before retirement.

Gregory Ostrowski is a Managing Partner & CFP® at Scarborough Capital Management

By Gregory Ostrowski, CommunityVoice