COVID-19 Update:

We are still available and able to have teleconference or video conference consultations

September 19, 2021


Retirement Checklist: Items You Must Not Forget

Creating a retirement checklist.The ongoing retirement of the Baby Boomers is marking one of the greatest demographic transitions in US history. If you are looking toward retirement a few years down the road, or even longer than that, there are certain preparations you need to start making now. Some of these are obvious, while others are less so. Below is a general (although incomplete) retirement checklist that you might want to consult.

Speak with a Financial Advisor

A good financial advisor will more than pay for themselves by saving you years of time and thousands upon thousands of dollars. Involve a financial advisor in every step of your retirement planning process that involves money. A skilled financial advisor will be able to help you understand just how one retirement decision affects another and how they all fit together.

Review Your Finances with a Realistic Eye

If most retirement experts can be believed, you are going to need at least 70% of your pre-retirement income to survive. Remember that this is a minimum, not a maximum. 70% might turn out to be insufficient to ensure that you enjoy a good quality of life. If your finances are marginal, consider delaying retirement until 70 so that you can max out on Social Security benefits.

Create a Budget

Don’t be afraid to spend months drafting and revising a realistic budget. Your financial advisor should be able to get you started. Create a spreadsheet that includes all your retirement living costs. Determine which of these are fixed and which are flexible. Once you know your expenses, you will be able to set an income goal and figure out how to reach it. Don’t depend completely on Social Security—most people will need additional savings.

Manage Your Debts

The last thing you need is to be drowning in debt during old age. Although it might not be necessary to pay off all your debts before you retire, you will probably need to minimize them if your retirement budget will require you to live on a smaller income than you enjoy now. Your financial advisor should be able to help you pay down your debts in the most tax-efficient way possible.

Plan Your Savings Withdrawals

Different typés of savings withdrawals result in different tax consequences. The rules are different for a 401(k) and a traditional IRA, for example, than for a Roth IRA. Traditional IRAs and 401(k) plans tax your distributions, and you will have to begin withdrawing from these accounts by the time you are 70. In most cases, it is best to delay withdrawing from a Roth IRA until later.

Start Building an Emergency Fund

A solid emergency fund will provide you with at least six months’ worth of living expenses without having to earn a dime during that time. Most Americans, however, cannot even muster that much. If you haven’t got that much, now is the time to start saving for it. An emergency fund is an excellent shock absorber for the unpleasant financial surprises that we all endure from time to time, and its effect on peace of mind is vastly underestimated.

Double Down on Your Savings

Unless you are way ahead on your retirement savings goals, you should use the years prior to your retirement to maximize your savings. For those over 50, traditional and Roth IRAs allow you to contribute up to $7,000 in annual contributions. A 401(k) will allow you to contribute up to $25,000 per year. These limits increase annually.

Make Sure You Have Adequate Life Insurance

If you are married, it is likely that one spouse will survive the other, and this is where life insurance can really matter. Many employers offer life insurance but withdraw coverage once you retire. With proper planning, however, you might be able to keep from losing coverage.

Make Sure You Have Adequate Health Insurance

With health care expenses in the US among the highest in the world, nothing is more important than ensuring that you enjoy adequate health care costs. Prepare for the worst case scenario, and carefully consider out-of-pocket costs. Most people benefit from joining MediCare. This might not be enough, though, depending on your individual circumstances.

Another form of “health insurance” consists of your daily health habits. If you smoke, for example, find a way to quit. Eat right, and get enough of exercise. Good health habits don’t just add years to your life—they can add life to your years.

Arrange for Long-Term Care Insurance

Even if you are in good health, you need to consider the possibility that something will happen and that you will spend your last few years in a long-term care facility, such as a nursing home. Not all such facilities are created equal, and you don’t want to end up in the wrong facility. The best way to preserve your freedom of choice is to be able to afford options.

Don’t wait until you are a senior citizen to purchase long-term care insurance. The earlier you purchase it, the cheaper it is. Premiums rise sharply as you get older.

Create an Estate Plan (or Update an Existing One)

Nobody likes to think about sickness and death, but it is necessary. Don’t neglect your estate plan while you are busy saving up enough money to retire in Barbados. It is particularly important that you create a living will that tells doctors in advance what types of medical treatment you are willing to accept. You might also want to consider appointing someone to make medical decisions for you should you become incapacitated. Finally, you might want to start thinking about what financial legacy you want to leave to your beneficiaries.

Consider Your Living Arrangements

You might want to stay right where you are after you retire, especially if you enjoy strong social networks. On the other hand, you might want to move where the weather is warmer. You might even want to take advantage of warm weather and a low cost of living overseas. Start researching these issues now rather than later.

Develop Your Hobbies

Once you are retired, you are going to have a lot of time on your hands. Science has shown us that the most active retirees tend to live longer, happier, and healthier lives. One of the best ways to enjoy an active retirement is to engross yourself in enjoyable hobbies. Most hobbies, however, aren’t all that rewarding until you get good at them. If you have at least a few years left until retirement, spend time getting good at a hobby so that you will be ready to enjoy it later.

It’s Never Too Early to Start Your Retirement Planning

Your retirement can go either way—smoothly or disastrously—depending to a great extent on the quality of your retirement planning right now. Remember, there is no such thing as a truly effective “cookie-cutter” retirement plan—everyone’s circumstances are different. Feel free to contact the Law Office of Andrew M. Lamkin, P.C. online or by telephone at 516-605-0625, so we can answer your questions and discuss your options.