Retirement Planning – Retirement Planning Checklist

Retirement Planning

Retirement can invoke mixed emotions in an individual. If you dislike the humdrum of work, traffic, deadlines, and meetings, retirement can be the best thing to happen to you. However, if you thrive on work and look forward to every day at the office, retirement may be a hard transition for you. Regardless of how you feel about retirement, it is inevitable that this phase will enter your life one day. And the only way to ensure that it is a pleasant one is by adequate retirement financial planning.

Financial planning for retirement can entail a number of things. Starting from saving and investing your money in the right instruments to purchasing a health and long-term care insurance plan, creating a will, having an effective tax strategy, creating a retirement budget, limiting your debt, and more, the list covers a range of tasks. Given the wide-ranging number of aspects that you must plan before retirement, having a retirement planning guide checklist can be of great help. A retirement planning checklist can ensure that you do not forget the necessary details while preparing for your golden years. It also provides you with a streamlined structure that you can follow for greater ease. Moreover, having a retirement checklist removes any chances of committing errors or being ill-prepared for a rather crucial phase in your life. If you’re not sure of how to begin, you can take help from a financial advisor who can advise you on things to keep in mind while preparing your checklist.

Here are 6 important factors to consider while preparing your retirement planning checklist:

Decide when you want to retire

As per the Social Security Administration, the full retirement age is between the ages of 65 and 67, depending on your year of birth. However, given the recent trends and an increasing inclination towards early retirement, many people are now retiring in their 40s and 50s. The age when you retire can be decided on the basis of a number of factors like your present income, your current and future standard of living, your investments and savings, your goals, money inherited from your parents or grandparents, health issues, and more. For instance, if you have received a large inheritance in your 40s that includes real estate, liquid assets, mutual fund investments, etc., you may be able to comfortably retire at an earlier age. In such a case, you may not have to worry about saving for your retirement corpus. However, if you started financial planning for retirement at a later stage in life, it may take you longer than usual to save up enough before you can retire. In such a case, you may not be able to retire until your late 60s. In another scenario, if you suffer from a health concern and are not able to work anymore, you may have to adjust your standard of living and may be forced to retire early. All of these aspects and various other possible scenarios will decide your retirement age. Therefore, the first point on a retirement checklist is to decide when you want to retire. All other plans can follow accordingly.

Plan your source of retirement income

The second thing on your retirement planning checklist should be the sources of your retirement income. Social Security benefits, retirement accounts, pension plans, returns from mutual funds and stocks, real estate, rental income, etc., are some sources of income in your retirement. Start by making a list of all your savings and investments. Now, understand the taxability of each of these instruments. Taxes are one of the biggest concerns a retiree can have. The amount of your taxable income will determine the true value of your retirement corpus. Another factor to consider here is inflation versus the rate of return from each of these investments. For instance, if you solely bank on Social Security benefits for retirement, you may be in for an unpleasant surprise. Firstly, the Social Security reserve is rapidly depleting. Secondly, your Social Security check will not hold up against inflation. Therefore, it may be recommended to save and invest in a combination of tools like Individual Retirement Accounts (IRAs), 401(k) accounts, real estate, exchange traded funds, direct equity, etc., to ensure that you earn inflation-beating returns. You must also keep in mind the withdrawal rules of each account. For instance, you cannot withdraw funds from an IRA before the age of 59.5. If you plan to retire early, for instance, in your early 50s, an IRA will not be a suitable choice for the initial years of your retirement. Here, you would need to bank on other savings to stay afloat until you reach the age of 59.5 and are able to use your retirement money.

Eliminate all your debt

Retiring with debt is a tough hurdle to overcome, so it is highly recommended that you avoid entering retirement with debt. With a limited pool of retirement savings, it can be hard to pay high rates of interest. Moreover, if you have loans with collateral, you risk losing precious assets, such as a house, if you are unable to settle the loan in time. Therefore, make sure to tick off all debt from your retirement planning checklist. You can start by creating a budget that focuses on reducing your spending and prioritizing paying back borrowed money. Once you have successfully paid back all your debt, you should focus on creating wealth next and avoiding any possibility of taking on debt later. You can invest your money in goal-based investments that will help you achieve your goals rather than borrowing money. In cases of extreme debt, a financial advisor can also help you sort things out with efficient planning.

Save enough for health expenses

Healthcare related expenses are a primary concern in retirement. As you age, your health is bound to deteriorate. Age related illnesses can catch up eventually and lead to hospitalizations, long term care at home, prolonged treatments, and more. Therefore, adequate health insurance becomes a must. As you undertake retirement financial planning, make sure to purchase a comprehensive health insurance policy early in life. This will keep you covered against all kinds of health expenses and also offer you the benefit of low premiums. The younger you are, the more affordable the premium. So, try not to delay this. Long term care insurance is also a crucial but often neglected component of health planning. Long term care can be very expensive, so make sure to cover it with a suitable insurance policy. Apart from buying health insurance plans, you can also consult a financial advisor and discuss other health saving options like a health savings account (HSA) and Medicare. Medicare is a federal health insurance plan that offers four different health plans – A, B, C, or D. You can pick them as per your requirement. HSA, on the other hand, is a tax deferred account that offers tax-free withdrawals in retirement to cover qualified health expenses. Regardless of what you choose, you must have enough savings to cover your health expenses in retirement. If not, you may have to reconsider your retirement age and save adequately before.

Create an estate plan

An estate plan is not limited to retirement planning alone and should be a part of your financial planning regardless of your age. Estate plans are crucial to ensure that your loved ones are financially protected in your absence. They also ensure that your money and assets are safely transferred to your beneficiaries with minimal tax liabilities and penalties. It is important to know that an estate plan is much more than just a will. It can also include setting up a trust for a minor child, creating health care directives in case of physical incapacity, making power of attorneys, appointing a legal guardian for your children, and a lot more. Having a conclusive and detailed estate plan will ensure that your will does not go through probate. The costs of probate are high and can cause financial and mental stress for your loved ones. Moreover, inconclusive wills and estate plans can also lead to feuds between your family members. Therefore, it is advised that you consult a lawyer and financial advisor and draft an estate plan before you retire. Financial advisors can also help you use tax-saving strategies like gifting or charity to pass on your assets to your heirs without paying high amounts of estate and inheritance tax.

Set up an emergency fund

Emergencies can come knocking on your door at the most unexpected of times. One of the best ways to ensure that you are prepared is by maintaining an emergency fund. An emergency fund should contain at least three to six months of your monthly income. Such a sum can be enough to cover most unexpected costs and keep you afloat during tough times. An emergency fund can be saved in a bank or any other investment that offers high liquidity and penalty-free withdrawals anytime you want. In the case of retirement, an emergency fund can also be used as you wait for your Social Security income or annuity income to begin. In case of a situation like the Covid-19 pandemic, an emergency fund can further cater to diverse types of financial inadequacies and offer you hope and confidence. There are various uses of an emergency fund, so make sure that you save enough funds and add this crucial point to your retirement planning checklist.

How to ensure you have a good retirement plan in place before you retire

As you move closer to your retirement, you may face a lot of questions, doubts, and slip-ups. Regardless of how much you plan or how conclusive your retirement planning guide checklist is, there is bound to be some confusion in the years preceding retirement. This can be due to natural apprehension before a big change in your life or even poor planning.

Here’s what you can do:

Five years before you retire

  • Get an estimate of your total retirement savings, so you know what to expect in retirement and how to plan your budget. If you find any inconsistencies, you can plan to delay your retirement by a few years.
  • Move to debt from equity, as it may be time to focus on capital preservation rather than capital appreciation now.
  • Take a look at your debt. If you have any pending payments, make sure you clear them in time. Avoid retiring with debt unless absolutely unavoidable.

One to two years before you retire

  • Consult a financial advisor to ensure everything is in order.
  • Check the withdrawal rules of all your retirement accounts and plan your withdrawals in a manner that your taxes are minimal.
  • Double check your health insurance plans, Medicare plans, HSA, or any other health savings account. Ensure you have adequate insurance. If not, make sure you get sufficient health insurance before you step into your golden years.
  • Take a second look at your emergency funds and see if it has sufficient funds needed for tackling emergencies.
  • Consider converting your employer provided 401(k) to an IRA to simplify paperwork in retirement.

Six months to 3 months before you retire

  • This is a time to ensure that all your financial planning for retirement is accurate. Recheck your retirement accounts, health insurance plans, emergency funds, bank accounts, etc. to ensure you have sufficient savings.
  • Look for part-time jobs or freelancing opportunities to slowly ease into retirement. These can offer you additional income and at the same time help you transition into a slower pace of life that awaits you post-retirement.
  • Talk to a financial advisor to make sure all your estimates are correct.
  • Do not stop investing your money. Retirement should not put an end to your investments. Rather, you should move to safer, low-risk investments options that can offer growth on your money.
  • Revisit your estate plan and make sure it reflects your most recent desires. If you have been divorced, widowed, separated, married, or remarried or if you have had children, grandchildren, or lost a previously nominated beneficiary, you would have to modify your estate plan. Be very precise on your will and crosscheck the names of the beneficiaries on your will with other accounts. For instance, you may have updated your will if you remarry, but your life insurance plan could still reflect your ex-spouse’s name. Rectify any such errors.

After you retire

  • Create a budget and stick to it to avoid running out of funds during your lifetime.
  • Follow the timetable for Required Minimum Distributions (RMDs) to avoid any penalties.
  • Strategize your withdrawals to maximize them. For instance, if you delay withdrawing your Social Security benefits till the age of 70, you can increase the value of your benefits by 50%. Small yet mindful approaches like this can help you ensure better financial security in retirement.
  • Stay busy and fulfill your goals and dreams. Remember that this is a great time in your life and you can make the most of it by being open to change and not resenting it.

To summarize

While everyone’s approach to retirement can be different, the retirement planning checklist mentioned above can benefit most people. This checklist can help you ensure that no important detail is overlooked and your retirement is well planned. An important thing to keep in mind is that financial planning for retirement is the most effective if you start it early in life. The longer you wait, the higher are the chances of your retirement savings being insufficient to live comfortably in retirement. Moreover, delaying saving for retirement also puts unnecessary pressure and a burden on you in the later years of your life. If you want help in retirement financial planning, you can contact a professional financial advisor in your area.

For further assistance on creating an effective retirement plan for your financial requirements, visit Dash Investments Dash Investments or email me directly at