If retirement is no longer a faraway dream but a soon-to-be reality, congratulations! This can be a very exciting transition, but oftentimes an emotional one, too. Ensuring a comfortable and financially secure retirement takes a little prep work, but when you take time to check all the boxes, you can feel more confident about achieving your goals for the future. Here’s a checklist for getting ready for retirement and how to shift to the next stage more successfully.
Officially retiring can feel like a giant leap, so how do we know when the time is right? Many factors can influence this decision, such as having family members who are still dependent on a worker’s income, wanting to pay down debt, or having a spouse who is considering retiring at the same time as their partner.
Deciding when to retire can also be impacted by Social Security eligibility, at what age you can begin claiming benefits, and when you can begin taking withdrawals from any retirement accounts. Once you reach a certain age, retirees must take required minimum distributions (RMDs) from certain qualified retirement savings accounts like 401(k)s and traditional individual retirement accounts (IRAs).
People are often mentally ready for retirement but may not be financially prepared for the next chapter. Part of zeroing in on a retirement date often includes evaluating outstanding debt, retirement accounts, personal savings, and investments to see if there is enough income for the years ahead. To help determine financial readiness, it’s good to calculate expected expenses, including healthcare costs, and compare that number to retirement savings and projected income. To retire confidently, it can also be helpful to consider:
Retirement goals and aspirations
Consider things such as traveling, pursuing hobbies, or spending time with family. Ensure a financial plan aligns with these retirement goals.
Physical health and overall well-being
Determine if you're physically and mentally prepared for retirement, including healthcare needs, insurance coverage, and access to quality healthcare services.
Social and emotional readiness
Think through social connections, relationships, and support systems. Consider how you’ll stay active and fulfilled in retirement.
Once a retirement date has been determined, it’s time to get things organized and set up for success. Here are some steps that can help you get started:
Review financial goals
See if they need to be updated to reflect what you have in mind for the future. Changes in health, career, family, and the market can all potentially affect financial goals and a retirement plan. Retirement may also introduce new goals like travel, relocation, or funding a grandchild’s education.
Evaluate housing situation
Determine if you want to age in place, downsize your home, or relocate to be closer to family. It may make more financial sense to move to a smaller home to reduce the cost of living. On the other hand, perhaps the mortgage is paid off, and staying put is a better choice.
Evaluate retirement savings and investments
Estimate how much income will be available once retirement begins. This can include employer-sponsored retirement plans, annuities, pensions, investments, and other savings.
Estimate retirement expenses
Include planned expenses like utilities, food, and transportation, as well as unexpected costs like rising healthcare expenses or long-term care. Will certain expenses be eliminated in retirement? Will new ones be introduced?
Create a retirement budget
Once income and expenses are estimated, determine ways to cut back spending, identify any gaps, and decide if certain spending categories will be added or eliminated once retired. A budget is essential to sustaining a retirement lifestyle and making sure financial goals remain on track.
Update estate planning documents
This includes wills, power of attorney, and healthcare directives to reflect current wishes. Ensure beneficiaries retirement accounts, life insurance, and other accounts are up to date.
Talk to a financial professional
Receive guidance before and during this next stage of life. Together, you can ensure there is enough retirement income to sustain your desired lifestyle and potentially discuss supplemental retirement income streams like an annuity.
Emotionally prepare for retirement
Reflect on personal values and goals and think about what you want to achieve and experience during retirement. Retiring can sometimes be letting go of a previous identity that was tied to a career or earlier life stage, so it can be helpful to explore what interests and activities sound appealing for the future. Perhaps that includes volunteering, learning new skills, or getting more involved in the community.
It's important for each person to tailor their checklist to match their individual needs and goals. Since retirement often involves significant transitions, such as changes in daily routines, relationships, and roles, anticipating these changes and adequately planning for them can help make the adjustment easier. Knowing you’re financially prepared for retirement and have the income needed to achieve your desired lifestyle can help lessen worries about the future and allow you to enjoy your life’s work finally coming to fruition.
The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.
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