A happy and financially secure retirement is a primary goal for many working Americans. I created a retirement checklist that will help you navigate through the complex path of retirement planning. For my readers who are serious about their retirement planning, follow these 12 steps to organize and simplify your planning process. My 12-step retirement checklist can be a practical roadmap regardless of the age you want to retire. Following these steps will ensure that you have reviewed all aspects of your life and how they can impact your decisions before and during your retirement. Here is the crucial retirement checklist of all the things you need to do in preparation for the next chapter of your life.
1. Know what you own
You have worked very hard for this moment. You have earned and saved during your entire career. Now it’s time to benefit from your hard work. The first step of your retirement checklist is understanding what you own. Don’t guess. Don’t assume. You need to thoroughly evaluate all your assets, real estate, businesses, and retirement savings. Everything that you have accumulated during your working years can play a pivotal role in your successful retirement.
2. Gather all your financial documents
On the second step of your retirement checklist, you need to collect all relevant documents that show your asset ownership – financial statements, trust documents, wills, property deeds. This will be an excellent opportunity to gather all your plan statements from old 401k and retirement plans. If you own a real estate, make sure you have all your deeds in place. If you are beneficiary of a trust, collect all trust documents. Check all your bank, saving accounts and social security statements. Make sure that you build a complete picture of your financial life.
3. Pay of off your debt
One of your main pre-retirement goals is to become debt-free. If you are still paying off your mortgage, student loans, personal loans or credit card debt, now it’s a great time to review your finances and come up with a payment plan that will help you pay off your debts and improve your retirement prospects.
4. Build an emergency fund
The emergency fund is your rainy-day money. It’s the money that covers unexpected expenses. So, you don’t have to dip in your regular monthly budget. It’s the money that will help you if you unexpectedly lose your job or otherwise unable to earn money. I recommend keeping at least six months’ worth of living expenses in a separate savings account. Ideally, you should have built your emergency fund long before you decided to retire. If you haven’t started yet, it’s never too late to create one. You can set aside a certain percentage of your monthly income to fill the emergency fund until you reach a comfortable level.
5. Learn your employee benefits
Sometimes employers offer generous retirement benefits to attract and retain top talent. Many companies and public institutions provide 401k contribution matching, profit sharing or a pension. Some employers may even offer certain retirement health care benefits. If you are lucky to work for these companies and public organizations, learn your benefits package. Ensure that you are taking full advantage of your employee benefits. Don’t leave any free money on the table.
6. Secure health insurance
A retired couple will spend, on average, $285,000 for healthcare-related expenses during their retirement. This cost is only going higher at a faster rate than regular inflation. Even if you are in good health, healthcare will be one of your highest expenses after you retire.
Medicare part A and part B cover only part of your healthcare cost including impatient and hospital care. They do not include long-term care, dental care, eye exams, dentures, cosmetic surgery, acupuncture, hearing aids and exams, routine foot care. You will be responsible for paying for Medicare parts D out of pocket through your private Medicare Advantage insurance. Medicare Advantage is a "bundled" plan that includes Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance), and usually Medicare prescription drug (Part D).
7. Maximize your savings
Unless you have a generous pension, you will have to rely on your retirement savings to support yourself during retirement. Your 401k and IRA will likely be your primary retirement income source. So even if you have championed your retirement savings, now it’s a great time to calculate if your accumulated savings can support you during retirement. To boost your confidence, maximize your retirement contributions to 401k plans, IRA and even taxable investment accounts. Once you reach 50, the 401k and IRA plans will allow making additional catch up contributions.
There is another compelling reason to save in tax-deferred retirement accounts. If you are in the prime period of your earnings, you are probably in a very high tax bracket. Maximizing your tax-deferred retirement contributions will lower your tax bill for the year. You can withdraw your money
8. Prepare your estate plan
Estate planning is the process of assigning trustees and beneficiaries, writing a will, giving power of attorney, and health directives. The estate plan will guarantee that your wishes are fulfilled, and your loved ones are taken care of if you die or become incapacitated. Creating a trust will ensure that your beneficiaries will avoid lengthy, expensive and public probate. Update your beneficiaries in all your retirement accounts.
Estate planning is never a pleasant topic or an ice-breaking conversation. The sooner you get it done the sooner will go on with your life.
9. Set your budget
Budgeting is a critical step in your retirement checklist. Once you retire, you may no longer earn a wage, but you will still have monthly expenses. Retirement will give you a chance to do things for which you haven’t had time before that. Some people like to travel. Some may pick up a hobby or follow a charitable cause. Others may decide to help with grandchildren. You may choose to buy a house and live closer to your kids. Whatever lifestyle you choose, you need to ensure that your budget can support it.
10. Create social security and retirement income strategy
The most crucial step in your retirement checklist is creating your income strategy. This is the part where you might need the help of a financial planner so you can get the most out of your retirement savings and social security benefits. Your retirement income strategy should be tailored to your specific needs, lifestyle, type of savings and the variety of your assets.
11. Craft a tax strategy
Even though you are retired, you still have to pay taxes. Up to 85% of your social security benefits can be taxable. All your distributions from your 401k plan and Traditional IRA will be subject to federal and state tax. All your dividends and interest in your investment and savings accounts are taxable as well.
Only, the distributions from Roth IRA are not taxable. As long as you have your Roth IRA open for more than five years and you are 59 ½ or older, your withdrawals from the Roth IRA will be tax-free.
Ask your financial advisor to craft a tax strategy that minimizes your tax payments over the long run. Find out if Roth Conversion makes sense to you.
12. Set your retirement goals
Retirement opens another chapter in your life. The people who enjoy their retirement the most are those who have retirement goals. Find out what makes you happy and follow your passions. Your retirement will give you a chance to do everything that you have missed while you were pursuing your career.
Navigating through your retirement checklist will be a reflection of your life, career, assets, and family. No one’s retirement plan is the same. Everybody’s situation is unique and different. Follow these simple 12 steps so you can enjoy and better prepare for your retirement. Be proactive. Don’t wait until the last minute for crucial financial decisions. Make well-informed choices so you can be ahead of life events and enjoy your retirement to the fullest.