Of course. Retiring is one of the most significant financial and life transitions you’ll ever make. A thorough checklist is essential for a secure and confident retirement.
15 critical things to check before you retire, categorized for clarity.
- Your Retirement Savings Number: Have you calculated your “number”? This isn’t a random figure but a detailed estimate of your annual living expenses in retirement. A common rule of thumb is that you’ll need 70-80% of your pre-retirement income each year, but this can vary greatly. Do the math based on your expected lifestyle.
- Sustainable Withdrawal Rate: How much can you safely withdraw from your savings each year without running out? The 4% rule is a classic starting point (withdraw 4% of your initial portfolio in year one, adjusted for inflation each year after), but recent reviews suggest a more conservative 3-3.5% might be safer for longer retirements. Model different scenarios.
- Social Security Strategy: When you start taking Social Security drastically impacts your monthly benefit.
· Full Retirement Age (FRA): For those born in 1960 or later, it’s 67.
· Early Claiming (62): You get a permanently reduced benefit (up to 30% less).
· Delayed Claiming (up to 70): Your benefit increases by 8% per year beyond your FRA.
· Check: Run your numbers on the SSA.gov website. Decide with your spouse on the optimal claiming strategy for your household. - Debt Assessment: Entering retirement with significant debt, especially high-interest credit card debt or a large mortgage, can strain a fixed income. Aim to be debt-free or have a solid plan to manage remaining debts with your retirement income.
- Emergency Fund: Even in retirement, unexpected expenses happen—a roof repair, a new water heater, etc. Maintain a cash reserve (e.g., 6-12 months of expenses) in a savings account or cash equivalents to avoid selling investments in a down market.
- Tax Planning: Retirement accounts have different tax treatments.
· Traditional IRA/401(k): Withdrawals are taxed as ordinary income.
· Roth IRA/401(k): Qualified withdrawals are tax-free.
· Taxable Brokerage Accounts: Subject to capital gains taxes.
· Check: Develop a tax-efficient withdrawal strategy. Which accounts should you draw from first to minimize your lifetime tax bill? - Healthcare Plan & Costs (Before Medicare): If you retire before age 65, you cannot use Medicare. You must have a plan for health insurance, whether it’s COBRA, a plan from the ACA Marketplace, or a private plan. This is often a retiree’s largest unexpected expense.
- Understanding Medicare: At 65, you become eligible for Medicare. It’s not free.
· Part A (Hospital): Usually premium-free.
· Part B (Medical): Has a standard monthly premium ($174.70+ in 2024, higher for incomes above a certain threshold).
· Part D (Prescriptions): Additional premium.
· Medigap/Advantage Plans: Most people purchase supplemental plans to cover gaps, adding more cost. Research this well before you turn 65. - Long-Term Care (LTC) Considerations: Medicare does not cover long-term care (e.g., nursing homes, assisted living). The average cost of a private room in a nursing home is over $100,000 per year. Decide if you will self-insure, purchase LTC insurance, or rely on other options.
- Other Insurance Review: Review your life insurance needs (may be less critical if you have no dependents relying on your income) and ensure your homeowners/auto policies are up to date. Consider an umbrella policy for added liability protection.
- A Detailed Retirement Budget: This is more detailed than your savings number. Project your monthly post-retirement budget line-by-line. Include essentials (housing, food, utilities), healthcare (premiums, out-of-pocket), and discretionary spending (travel, hobbies, gifts). Test-run living on this budget before you retire.
- Your “Purpose” or Plan: Retirement can last 30 years. What will you do with your time? Check that you have a plan for staying socially connected, mentally engaged, and physically active. Whether it’s part-time work, volunteering, hobbies, or travel, having a purpose is crucial for happiness and health.
- Housing Plan: Do you plan to age in place in your current home? If so, does it need modifications (e.g., grab bars, no-step entry)? Or do you plan to downsize or relocate to a lower-cost area or a community? This is a major financial and lifestyle decision.
- Estate Plan Documents: This is non-negotiable. Ensure these documents are created, updated, and accessible:
· Will: Dictates how your assets are distributed.
· Revocable Living Trust: Avoids probate and manages assets during incapacity.
· Durable Power of Attorney: Names someone to manage your finances if you cannot.
· Advance Healthcare Directive/Living Will: Outlines your medical wishes and names a healthcare proxy. - Investment Portfolio Allocation: Your risk tolerance changes in retirement. You need your portfolio to provide income but also to continue growing to outpace inflation over a potentially long retirement. Check that your asset allocation (stocks vs. bonds) is appropriate for your new distribution phase, not the accumulation phase.
Final Advice: This is not a checklist to complete alone. Consult a fee-only financial planner and an estate attorney to review your specific situation and help you build a resilient retirement plan.