FROM THE BLOG

Retirement Checklist

Putting a retirement plan together can be complicated. It requires time and effort to effectively implement, monitor, and update your plan. However, having a solid plan in place can provide confidence for your future financial planning.

While getting started early on your retirement planning is ideal, you can certainly make a solid plan even if you’re coming into things a little later in the game. A smart approach to retirement planning is to get started as soon as possible in order to make the most of the time between now and when you plan to retire.

And the best part? You don’t have to do this alone. Your CERTIFIED FINANCIAL PLANNER™ practitioner can help you work through your retirement planning strategy and come up with a timeline and portfolio that make sense for your current needs, as well as your desired financial future.

As you prepare to start working with your advisor on your retirement planning, use the following checklist to organize your thoughts:

Define Goals

Before you know how much money you need to save, you need to know what exactly it is that you’re saving for. Retirement can be a nebulous concept until you start to put some numbers and specific plans into place for the period of time that is your retirement.

Here are some questions to ask yourself:

  • What does retirement mean to me? For some, retirement means spending more time with family. For others, it’s a long-anticipated time for traveling, starting a new business, or working with a charity.
  • How will I structure my days? Like it or not, your career is an integral part of your identity and many people often spend more time at work than at home. Whether you plan to slow down or start a new journey, your ideal retirement lifestyle is a huge factor in determining how much money you’ll need.
  • Have I determined a realistic retirement age? The ideal retirement age varies from person to person and can impact your ability to collect certain benefits, such as Social Security. Your retirement age, along with other factors, like your health and family circumstances, can also influence the expected length of your retirement.
  • Do I have a written plan? While you don’t need to have a formal written plan before you begin working with an advisor on retirement planning, look through your financial paperwork and locate a written plan if you have anything on hand.

Identify Expenses

Before you can decide how to fund your retirement expenses, you need to know the types of expenses you’ll have and how much to set aside for each. In some senses, your day-to-day expenditures may not change, but because your lifestyle may radically change during retirement, certain figures may be higher or lower than you expect.

Consider the following:

  • What are my essential and discretionary expenses? Essential and discretionary expenses are the combination of expenses that include the things you must have and pay for regularly (essential expenses) and those that you can live without or that will vary from month-to-month, year-to-year (discretionary expenses).
    • Essential expenses include:
      • Housing
      • Food
      • Utilities
      • Healthcare
    • Examples of discretionary expenses include:
      • Gym membership
      • Traveling
      • Dining out
  • Will I spend more on travel or hobbies once I have more time to devote to them? Answers to questions about your retirement lifestyle can help you to understand whether you’ll actually be able to devote your time to your travel and hobbies or whether other commitments will realistically require your time and attention.
  • Do I have any debt? If so, what kinds? Entering retirement with zero debt might be seem ideal but is not always a realistic financial goal.
  • How will my health insurance premiums change once I retire? Many retirees find the shift from an employer’s health insurance plan to Medicare or another health insurance option impacts their month-to-month expenses.
  • Should I stay in my current home or move? Another state might be more retirement friendly, with lower taxes or cost of living. You may also wish to downsize from the home where you raised a family to a smaller, more manageable place to live.
  • Have I thought about taxes? If you are retiring to a lower tax bracket it is important to take advantage of the tax savings on your retirement income.

Evaluate Resources

Do you know where your retirement income will come from? For most investors, this is the (no pun intended) million dollar question. Now that you’ve got an idea of your expenses and long-term financial commitments, it’s time to consider how you’ll fund your retirement lifestyle.

As you work through your retirement figures, take these factors into account:

  • When will I file for Social Security? You can file for Social Security as early as age 62 and as late as age 70. Filing before your full retirement age might result in a permanent reduction in your lifetime benefits, so plan accordingly.
  • When can I start collecting my pension (if applicable)?
  • Do I have annuities that provide income?
  • How much do I need to have saved in IRA’s, 401k’s, and investment accounts? Often, your investments will provide a significant portion of your retirement income. This is why it’s important to strategize your retirement needs and work backward to the present to determine how much you’ll need to save and which investments are ideal for your situation.
  • Am I saving enough per year? Many studies suggest individuals need to save 10%-20% of their gross income each year, including amounts saved from personal deferral and any company match.
  • Do I have a plan for converting investments into an income stream? In most cases, you want to prepare your retirement plan with longevity in mind. However, there are some risks to outliving your benefits. This is a particular issue for pension holders, so if you do qualify for a pension, ensure that you have alternate retirement income to cover the gaps, should they arise.

Dealing with the Unexpected

Retirement investing is contingent on balancing risks. There are plenty of unexpected circumstances that may arise between now and when you’ll begin drawing your retirement income.

Consider these risk factors that have the potential to impact your retirement planning:

  • How will I manage unforeseen market shocks? You can’t predict how markets will behave over the next decades and when your retirement income depends on a certain level of stability, you could risk your future returns if you need to dip into your underlying investments.
  • Do I have a plan to combat inflation? Inflation erodes your purchasing power. That means your dollar today won’t be worth as much in the future and it’s important to plan accordingly.
  • Do I have all the insurance I need? Your insurance needs can change as you transition from working to retirement. Look into how these changes can influence your retirement insurance needs, as well as how your month-to-month expenses will be impacted.
  • Should I purchase long-term care insurance? Long-term care insurance is a safety net to protect your assets should you require extended care at any point during your retirement. Your health history and family factors can influence your decision to purchase long-term care insurance.
  • Do I have an adequate emergency fund? It is typically recommended to have 3-6 months’ worth of living expenses readily available as cash for emergencies. You may need (or want) more in retirement.
  • Do I anticipate any major one-time expenses? There are some one-time purchases that come up from time to time in life – retirement is no exception. If you anticipate some of these larger purchases, such as home repair or college tuition, ensure that you account for these expenses in your retirement planning.

Steps to Take Today

Before you take the leap to retirement, there’s some work to do. But with careful planning, you can create a retirement plan that should ideally be flexible enough to accommodate your retirement lifestyle and expenses.

Here are some steps to take today:

  1. Simplify your portfolio. Consolidate your accounts to make sure you have a clear and accurate picture. Ensure that your assets are invested properly and that your investments make sense for your values and can help you pursue your goals for your financial future.
  2. Prior to retiring, try to live on your projected retirement budget for several months. It’s a good idea to practice a new budget before committing to it full-scale. You may find that you spend more than you think you will and need to make adjustments. There are likely places where you’ll find cost savings and added expenses that you didn’t anticipate in advance.
  3. Don’t be shy about asking for professional advice. You’ve probably never retired before. It’s natural to not know everything about this transition, so find someone who can guide you through the process. A CERTIFIED FINANCIAL PLANNER™ practitioner can help you to prepare for your retirement by thinking through your future needs and identifying savings methods and investments that are suitable for your need.

If you’d like to learn more about preparing for your retirement, contact Jacob Sturgill for a consultation today!

This information is not intended to be a substitute for specific individualized financial or tax advice. We suggest that you discuss your specific financial or tax issue with a qualified advisor.