Take These 12 Steps 6 Months Before You Retire

You've been preparing yourself financially for retirement during your entire working life, saving in an IRA or 401(k). Now your final working date is within sight.

It may have been thrilling to think about what you can do when you're retired and be able to spend time the way you want to spend it. But now that the day is almost here, you may be worrying about whether you have saved enough for retirement or how life will be living on a fixed income.

To put your mind at ease, follow these steps to be sure you are prepared for retirement.

You don't want to retire and live on a fixed income with debt on your balance sheet.

It's a good idea to get out of debt before you retire. Consider paying off your credit card or finishing up your payments on a personal loan. 

Big-ticket items like a car or home mortgage may be harder to pay off, but you should make sure those payments are factored into your estimated retirement budget.

Your contribution to your employer-provided 401(k) or other employer retirement accounts may have been deducted from your paycheck during your working life, so you don't even notice it.

Check how much you're putting toward those accounts each month and see if you can up your contributions in the months before you retire. 

It's also a good idea to make sure you are maxing out your employer-matching funds to get the most out of that benefit before you leave the company.

If you've been a conscientious saver during your working life, you should be in good shape for retirement. But making a big-ticket purchase right before you stop working may not be the best move.

Instead, hold off on purchasing that new car or splurging on a European vacation. Those big costs can add up to big savings if you can invest them in your retirement portfolio or add that cash to a high-yield savings account before you retire.

One of the most important decisions you have to make before you retire is when to start taking your Social Security benefits. This decision may affect your entire non-working life.

If you haven't already done so, create an account on the Social Security website. You can use the Social Security calculator to determine how much you will receive each month, depending on the age you begin collecting benefits. 

You may want to take your distributions as soon as you retire or perhaps hold off until age 70 so your monthly income will be greater throughout your retirement.

At any age, an emergency fund is key to your financial well-being. You should use it to cover any unexpected costs like a car accident, surprise home repair, or temporary job loss. 

Otherwise, you may have to use a credit card, which may cause even greater financial harm.

On a fixed income, an emergency fund can be even more important when an unexpected expense crops up. Make sure your emergency fund is topped off before you retire.

A long-term care insurance policy helps cover the cost of care for a chronic illness, skilled nursing, or disability so you don't have to drain your retirement savings. 

The younger you are when you purchase a policy, the less expensive it may be.

As with any insurance, you should shop around to see what different providers offer, what policies cover and don't cover, and at what price.

Your retirement investments may have been in risky funds or heavily weighted in stocks when you were younger and could weather the dramatic ups and downs of investment markets.

Now that you're planning for retirement, you may want to think about diversifying. If you have potentially volatile investments, you may not be able to wait a few years while the market recovers from a downturn. 

It's a good idea to review your investment portfolio and make sure your investments are diversified in vehicles that won't expose you to too much risk in case of market downturns.

You may be living in a big house that was perfect for you and your kids before they moved out. Or perhaps your home is in a high-cost-of-living area so that you are close to your workplace.

Your home may have treated you well while you were working, but you might want to downsize or move to a different area to save money when you retire. A big home may also cost more in upkeep compared with a smaller house, which could be an issue when you're on a fixed income.

Consider your options now and develop a plan for your living situation in the short and long term as part of your retirement plan.

You may have a general idea of your monthly expenses when you're retired. After all, an estimated budget may have been one tool that helped you decide when it was the right time to retire.

But as you get closer to your retirement date, revisit your budget and see if there are ways you can fine-tune it to save money. You may be surprised by how much you underestimated or overestimated the cost of some items.

So what exactly do you have in your retirement portfolio that you can draw from? How much income will you have in addition to Social Security? 

Take a good look at all of your savings accounts and investments and run some scenarios for various markets.

Consulting with a financial adviser at this time may be a smart move. Their expertise is evaluating your current holdings and suggesting plans to ensure your future.

After taking care of the important financial aspect of retirement, it's good to remember that you do want to spend some time doing fun stuff during your retirement.

Make sure your budget includes things like vacations, hobbies, or entertainment. And remember that you can have several price points when it comes to what you can afford. 

It's OK to splurge on dinner out at an expensive restaurant or buy high-end materials for your hobbies if you have the funds. You saved for years to enjoy your retirement and that includes spending your money on fun things.

Perhaps you're still worried about covering your costs in retirement or maybe you just want something to focus on to avoid the monotony of your retired days.

You may want to think about picking up a side hustle to earn extra income or give yourself something to work on. Perhaps you could monetize a hobby or start a part-time job in a field you've always wanted to try. 

A side hustle can be a good option to help pad your retirement savings and keep you productive.

You may have several months before you officially retire, but that doesn't mean you can't start preparing now for life when you're retired. So think about what you need to prioritize to get ready.

Once you know where you stand financially, you can make an estimated retirement budget that may include different items than when you were working. 

You don't want to end up wasting money in retirement. After all, every bit counts when you're on a fixed income.