Think you can retire in 3 years or less? Here are 5 things you must do with your money ASAP

1. Explore your health insurance options

First and foremost, you'll have to tackle the health insurance issue.

Fidelity estimates that on average, a 65 year old needs $165,000 in after-tax savings to cover health care expenses throughout retirement.

"Health care is creating a 'retirement cost gap' for many pre-retirees," said Steve Feinschreiber, senior vice president of the Financial Solutions Group at Fidelity. "Many people assume Medicare will cover all your health care costs in retirement, but it doesn't. So you should carefully weigh all options."

If you retire at 65 or later, you can get Medicare immediately but should still look into Medigap and Advantage plans to reduce your out-of-pocket spending. If you aren't yet 65 at the time you retire, you need a different plan for insurance coverage until you reach Medicare age as you can't go without it.

One option is to use COBRA to stay on your employer's plan for up to 18 months. Sadly, you'd get stuck with the full premiums without any employer subsidy, which makes this option costly. Signing up for individual coverage on the Obamacare marketplace is another option, but be aware the coverage often isn't as great as that of the plans available through an employer.

Whatever you decide, you must know how much your insurance will cost, what it covers versus what you are responsible for, and where the money is going to come from to pay for all of this.

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2. Get your cash flow right

Next, you must make a plan for how you'll manage your money. This means considering income coming in and income going out to ensure you can live within your means. Financial experts say you’ll need 80% of your pre-retirement income per year to maintain your lifestyle in retirement.

Income sources typically include Social Security, any pension that's provided and/or money from savings. You'll need to make sure this covers your spending needs and you outlive your savings. One popular rule of thumb says that if you take out 4% of your balanced portfolio in year one and adjust that amount for inflation in the following years, your nest egg will last 30 years.

3. Maximize retirement account contributions

If you have just a few years or less to build your savings account balance, you should get serious about doing so.

Many Americans don't have quite enough saved for retirement, and these last key years of work help you to bulk up your account balance — especially since you're allowed to make extra tax-advantaged catch-up contributions to your 401(k) or IRA.

As you contribute to your account, don't forget to make sure you also have the right asset allocation. You'll need to draw from your funds soon so you can't be too aggressive with your investments. One popular method for asset allocation is subtracting your age from 110 and putting that percentage of your portfolio in equities.

Kiss your credit card debt goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

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4. Decide when to take Social Security

Your Social Security retirement benefits are going to be a crucial income source, as unlike most money retirees get, these benefits are guaranteed not to run out and are automatically protected against inflation thanks to cost-of-living adjustments.

You can claim Social Security between 62 and 70, but you have a full retirement age (FRA) you must wait for if you want your standard benefit. If you were born in 1960 or later, your FRA is 67.

If you claim at 62, your benefits are reduced by as much as 30%. If you delay until after your FRA, then you get delayed retirement credits for each year until 70. If you wait until 70 to claim and maximize your credits this way, you will get 24% more in benefits than if you had claimed at your FRA.

Studies have shown claiming later provides more lifetime gains. You're typically financially better off getting fewer checks but bigger ones once you eventually claim them. However, this won't be the right choice for everyone since there are other factors to consider, so think carefully and research the implications of your decision.

5. Pay off high-interest debt

Finally, if you have any high-interest debt, you should aim to pay it off before leaving work. Covering interest costs only gets harder on a fixed income, especially with the average credit card interest rate coming in at 21.76% as of August 2024.

If you can get serious about repaying what you owe, then you can enter retirement with a clean slate and free up the money you'd have sent your creditors to do other things.

By taking these steps, you can get yourself in the best financial position so when the time comes to enjoy life with no job holding you back, you'll have the funds to do it.