Here Are 5 Things You Need To Do 5 Years Before You Retire

Working until you drop isn't actually a great retirement strategy.
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1. Admit to yourself that you are, in fact, going to stop work at some point.

"Working until I drop" isn't actually considered a great retirement strategy. For one thing, the choice to keep working isn't always ours to make: Ask any older worker who was laid off about trying to find another full-time job. Older workers stay out of work longer than any other age group and many never reenter the workforce full-time after a layoff.

Another thing also happens: Older workers begin to play The Obit Game. They start hearing about friends and people they know having heart attacks or being treated for cancer and it causes them to question their own mortality. They don't want to be the person on their death bed who says they wished they had spent more time with their family.

So yes, you need to accept that there will be a day when you no longer go to work. Now is a good time to figure out when that will be.

2. Pay attention to health care costs.

The tendency is to think about housing in retirement. But it's health care, not housing, that will kick you in the teeth. According to the latest retiree health-care costs estimate calculated by Fidelity, a 65-year-old couple retiring this year will need on average $245,000 to cover medical expenses throughout retirement. But when Fidelity asked pre-retirees how much they thought they would need for health care, nearly half the respondents (48 percent) said $50,000, according to Jeanne Thompson, vice president, Fidelity Investments. That's a big disconnect.

Five years before you hope to retire is the ideal time to know what you want your retirement to look like, and yet far enough away so there’s still time to alter your plans so you can actually get there, said John Sweeney, executive vice president, Fidelity Investments.

3. Downsize your expectations or buy more lottery tickets.

The retirement picture may not be as rosy as you once hoped. An Insured Retirement Institute survey found that only 27 percent of baby boomers thought they had enough money to last through their retirement. That other 73 percent? They presumably know they don't. A recent report from BlackRock said the average baby boomer has a goal of accumulating enough of a nest egg to have $45,500 a year in retirement income. But the average retirement portfolio has just $136,200 in it, which would provide an average estimated income of $9,129. That would leave the average boomer nearly $37,000 per year short of his goal.

So in the next five years, how do you plan to bridge that gap? If you can't earn more, the answer is to spend less. Look for ways to downsize your spending. Cut down on your meals out; visit the library for books to read; investigate less expensive transportation options to automobile ownership.

4. Get yourself in shape.

Good health is the best currency you can bring with you into retirement. Get your weight under control and add exercise to your daily life. Just walking helps.

5. Eliminate your debt.

Pay off credit cards, car loans and anything else you may owe money on. Paying down debt is one of the most cost-effective moves you can make at this point, financial planners say.

Take a look at any expenses you have for services that you likely won’t need when you retire and start to eliminate them now. Cancel the newspaper that nobody has time to read. Start tending to your own lawn. The goal is to reduce your monthly expenses by even just 10 percent. You can sock away the money and get a good taste of what retirement budgeting will feel like.

At the same time, look for ways to make your assets work for you. Can you rent out a room in your home to a student? Can you convert the garage into a studio apartment for rent? Is it time to sell your home and use the equity in it to invest in income property somewhere?

The bottom line: Now is a good time to get real about what you can accomplish in your remaining years in the work force.

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Kentucky takes the top spot with its low cost of living and tax breaks for retirees. According to SmartAsset, retirees can claim deductions on about the first $41,000 of their retirement income, from sources like their IRA and 401(k). The Bluegrass State will also appeal to nature lovers, offering plenty of fishing, boating and hunting opportunities.
South Dakota
You'll have to brace yourself for chilly winters, but South Dakota offers beautiful national parks and monuments -- and, of course, Mount Rushmore. It also offers some of the lowest housing costs in the nation.
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Another win for nature lovers, Wyoming is home to the beautiful Yellowstone National Park. But besides the breathtaking scenery, early retirees can benefit from having no state personal income taxes and a low sales tax.
Music lovers will want to flock to Tennessee for its rich music scene. Here, retirees can also benefit from no state personal income tax and an affordable cost of living -- but beware that the sales tax is high.
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The cost of living in this Southern state will help retirees save, falling 15 percent below the national average, according to SmartAsset. Retirement income is also safe from state and local taxes here. The state prides itself on its culinary delights and history.
New Mexico
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Retirees headed to this Southwestern state will benefit from the low cost of insurance. SmartAsset says that for the average 60-year-old, the cost of purchasing silver-level health insurance coverage is the third lowest in the nation.
Sports fans will have plenty to keep them occupied in this state rich with pro and college sports teams. Retirement income is tax-exempt here, as are pensions for people over 59.5 years old.
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The tranquil Northwestern state is sales tax free and has some of the lowest housing costs in the nation. Retirement income taxes are also fairly low.
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Who doesn't consider Florida a retirement dream? The Sunshine State doesn't have a state income tax, but due to its popularity, you'll have to shop around in different cities to find affordable housing.
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Retirees have a number of options when it comes to settling in the Lone Star State. Texas has numerous large, vibrant cities, including Austin, Houston, San Antonio and Dallas. The cost of living here is relatively low, but property taxes run high, according to SmartAsset.

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