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When you reach your mid-60s, you may feel ready to retire, but are you?

Before you start spending any of your 401(k) stash, you need to make sure you’re really financially set to stop working.

Preparing to retire involves more than just stocking up on tropical shirts. The following 8 steps can help you feel confident about starting your new life of leisure:

  1. Create a balance sheet: Experts estimate you’ll need at least 70 percent of your pre-retirement income to live comfortably, according to the U.S. Department of Labor. List your assets, liabilities and net worth to evaluate your total savings. Make a retirement budget to estimate what you’ll need each month and identify areas where you can reduce spending. Consumer Reports offers a free printable worksheet that can help you gauge major expenses.

  2. Figure out when to start receiving Social Security: 65 used to be the full retirement age; however, if you were born after 1960, it’s now 67. You can hold off on receiving Social Security benefits until you’re 70, or start receiving them at age 62 and take home a little less — the amount is reduced based on the number of months left before you hit 67, according to the U.S. Social Security Administration. (Your monthly benefit amount will be cut by roughly 30 percent if you start receiving benefits at 62. Start receiving benefits at 66, however, and you’ll only experience a 6.7 percent reduction.) Use the Social Security Retirement Estimator to get an idea of the benefits you’d receive.

  3. Factor in future taxes: Neglecting to include tax costs when figuring out your retirement expenses can cause problems, because withdrawals from tax-deferred accounts, including traditional IRAs and 401(k)s, are taxed as ordinary income — and at the top tax bracket, according to Kiplinger — which can mean you’ll have less money to spend. So when you’re figuring out how much you’ll need to live on each month, remember to deduct your estimated taxes.

  4. Pay off any remaining debt: Housing costs absorb 30 to 40 percent of Americans’ incomes, according to Forbes; paying off your mortgage with additional payments before you retire can help eliminate that expense. Likewise, the interest you’re paying on credit card and other debt can bite into your monthly budget. U.S. News & World Report suggests creating a two- to three-year plan that will restructure your debt and allow you to pay it off, possibly with the help of a credit counselor. (Legit ones are paid by creditors and banks; you can find reputable credit counselors on the National Foundation for Credit Counseling’s website.)

  5. Get necessary medical and other insurance: You can sign up for Medicare — which you’ll get if you’re a U.S. citizen or permanent legal resident and you or your spouse worked for at least 10 years — three months before you turn 65 through three months after. Filling out an application during that time can help you avoid paying a 10 percent Medicare Part B premium for each 12-month period you delay program enrollment, according to U.S. News & World Report.You’ll also need to compare your Medicare Part D prescription drug plan options (you can find general Medicare costs at, and you may want to shop around for dental insurance. According to the Centers for Medicare & Medicaid Services, Medicare will fund dental services that are a key part of another covered procedure, such as an injury-related jaw reconstruction, but it generally doesn’t pay for cleanings, dental surgery or other oral care options. To maximize your current coverage, AARP suggests scheduling your annual physical, next dentist appointment and any other checkups before retiring. Considering getting long-term care insurance? Estimate how much you may need with MSN Money’s Long-Term Care Calculator.

  6. Prepare to exit your job: CNBC recommends using up any remaining vacation days and printing out compensation statements from your company’s system. This will show how much you’ve spent for health insurance and what tax was withheld, which can help you create a budget (that type of documentation will likely be easier to access while you’re still at your job).If you have a pension plan, ask human resources whether the pension is qualified (meaning payments are not taxed) or non-qualified (meaning payments will be taxed) and what payout options are available to you, according to CNBC. Store the pension plan and plan manager’s names and contact information in an easy-to-access place for post-retirement questions.

  7. Review estate and other documents: CNNMoney advises checking the beneficiaries listed on your 401(k), IRA, life insurance and pension policies to ensure your assets will go to the correct people if you pass away — even if you haven’t updated your will.

  8. Create an emergency fund: From auto repairs to illness, significant expenses can pop up during retirement — and when you’re living on a fixed income, shelling out big sums for unexpected bills can be stressful. AARP suggests proactively preparing by creating an emergency savings fund and reviewing your homeowner’s insurance policy to make sure you have enough coverage for major incidents.

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