Retirement is on the horizon! If you plan to step away from work in the next 1–2 years, now is the time to fine-tune your plan and address the details that will help you retire confidently. Here’s your comprehensive checklist:
1. Clarify Your Retirement Date
Selecting your retirement date isn’t just about marking a calendar.
- Confirm eligibility for retirement benefits through your employer, such as pension payouts, health coverage, or unused vacation pay.
- Check company requirements: Some employers require advance notice or paperwork to begin retirement benefits, so start early!
- Coordinate with your spouse or partner if you plan to retire together or stagger your retirement for health or financial reasons.
2. Review Your Income Plan
Get a clear picture of how you’ll replace your paycheck.
- Estimate expenses: Use budgeting tools to project your monthly spending, including essentials, recreation, travel, and unexpected costs.
- Identify all income sources: Social Security, pensions, annuities, retirement accounts (IRA, 401(k)), taxable investments, and potential part-time work.
- Check withdrawal strategies: Make sure your planned withdrawals won’t deplete assets too quickly—factor in longevity and market variability.
- Test scenarios: Run “what-if” scenarios to see how changes (such as market dips or higher expenses) could affect your plan.
3. Optimize Your Social Security
Maximizing Social Security can significantly impact your lifetime income.
- Explore claiming strategies: Compare starting benefits at age 62, at full retirement age (FRA), or waiting to age 70 for maximum payouts.
- Spousal benefits: If married, coordinate claiming dates to optimize household income; survivor benefits can also be important.
- Analyze taxes: Understand how Social Security benefits may be taxed and plan accordingly.
4. Fine-Tune Your Investments
Align your investments for this new chapter.
- Adjust risk levels: Near retirement, it often makes sense to decrease exposure to highly volatile assets and increase holdings in stable investments like bonds or cash.
- Rebalance portfolio: Analyze current allocation and rebalance to match risk comfort and income needs—don’t forget RMDs if you’re close to 73!
- Prepare for withdrawals: Set up a process for drawing from your investments—consider tax efficiency and timing.
5. Understand Health Care Options
Health care is one of the biggest retirement costs, so plan ahead.
- Bridge the gap to Medicare: If retiring before 65, look into COBRA, private ACA plans, or retiree health benefits.
- Estimate costs: Include premiums, deductibles, copays, dental, vision, and prescription expenses in your budget.
- Medicare planning: Start research at least six months before you turn 65 to ensure timely enrollment and avoid penalties.
6. Prepare for Required Minimum Distributions (RMDs)
RMDs are mandatory withdrawals from certain retirement accounts.
- Know the rules: RMDs start at age 73 for IRAs and most 401(k)s—missing an RMD can trigger steep penalties.
- Calculate your RMDs: Review projected balances to estimate withdrawals and consider the tax implications.
- Plan ahead for taxes: Coordinate RMDs with other income sources to minimize tax surprises.
7. Assess Your Debt and Cash Flow
Financial flexibility is key to a stress-free retirement.
- Reduce high-interest debt: Aim to pay off credit cards or personal loans, and consider paying off your mortgage if feasible.
- Review your budget: Adjust for changes like downsizing, relocating, or increased health expenses; keep some flexibility for unexpected costs.
- Building a buffer: Maintain emergency savings to cover three to six months of expenses.
8. Review Estate and Legacy Plans
Ensure your wishes are clear, current, and easy to carry out.
- Update your will: Address changes in beneficiaries, assets, or family dynamics.
- Check powers of attorney (POA): Confirm both financial and health care POAs are up-to-date and assigned agents are able to act if needed.
- Revise beneficiary designations: Make sure IRAs, 401(k)s, and life insurance policies reflect your current intent.
- Trusts and directives: Review any trusts or living wills; discuss changes with your advisor or attorney.
9. Plan Your Lifestyle
Retirement is about more than finances—it’s about what you want to do!
- Define your vision: Clarify plans for travel, hobbies, volunteering, or part-time work—retirement is your chance to craft your ideal lifestyle.
- Family and social connections: Think about where you’ll live, proximity to loved ones, and ways to stay connected.
- Healthy routine: Consider routines and activities that support physical and mental well-being.
10. Meet with Your Advisor
Professional guidance makes a world of difference as you enter retirement.
- Schedule a retirement readiness review: Take a deep dive with your advisor to check every detail—income, investments, taxes, health care, and estate plan.
- Discuss catch-up strategies: Make final pre-retirement contributions to retirement accounts if you’re eligible.
- Explore tax-efficient withdrawal tactics: Plan ahead so you keep more of your hard-earned savings.
- Set regular check-ins: Plan to meet annually (or more often) to monitor and adjust as needed.
Bottom Line:
The last couple of years before retirement are your chance to ensure everything is on track so you can enjoy your transition with confidence. If you want help reviewing your plan or need personalized advice, our team is here to guide you every step of the way.