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Pre-Retirement Checklist

Last Updated:  April 28, 2020

For most people, the thought of retirement brings joy and excitement . . . it should after all! That trip to Napa, hitting the links on a weekday, spoiling the grandkids, cruising with the top down.

If you’re wondering “Can I retire yet?” then the freedom of retirement is on your mind!

For other people, the thought of retirement can be absolutely terrifying! Will I die broke? What if I need long-term care? How will I pay for health insurance? Will my retirement income be enough to actually enjoy retirement? What if I have to go back to work?

After all, once you retire you can’t earn it again!

Whether you’re carefree and excited or stressed-out and anxious, it makes sense to put the extra time and effort into making sure you’re actually ready to retire! That’s where the pre-retirement checklist can help.

My entire career I’ve helped people like you prepare for—and actually live—the retirement they’ve always dreamed of. In those few decades of experience, I’ve found this checklist to be the most important part of preparing for retirement when you’re a “short-timer”.

Pre-Retirement Checklist Step 1 – Learning

You’ve heard the adage “You don’t know what you don’t know?” Well, “what you don’t know” can destroy your retirement!

I’m not talking about “You can’t take that trip” or “You can’t spend as much on Christmas for the grandkids.”

I’m talking about “You’ve got to go back to work as a barista at Starbucks because you missed something critical!”

For that reason, the most important part of preparing for retirement is learning. You’re reading this so you’re off to a great start, but there’s so much more you need to learn!

Even if you decide to hire a professional to help you plan for retirement (like a certified fee-only fiduciary financial advisor) you should still educate yourself on the basics. It’s your retirement after all!

Here are the most important retirement topics you need to “brush up” on before you can move on to #2 – Retirement Planning.

Know Your Critical Retirement Dates & Deadlines

These retirement dates and deadlines are the very first thing you need to become familiar with. You don’t need to memorize them per se (especially because I’m going to give you the cheat sheet in my Retirement Mastery Toolkit), but you should have a general idea of things to watch out for and when to watch out for them.

For example:

  • When do you qualify for Medicare and what’s the penalty if you don’t enroll in time?
  • When can you claim your Social Security benefits and how can you get the most money?
  • What’s the penalty for pulling money from a retirement plan account to early and how can you avoid the penalty (legally)?
  • When are you required to pull money from your retirement plan accounts and what’s the penalty if you don’t?
  • And on and on . . .

And these retirement dates and deadlines change regularly. For example, the Secure Act pushed your required beginning date for IRA required minimum distributions to age 72. You’ve got know these things and keep up on regulatory changes.

In fact, these retirement dates and deadlines are so important if you get them wrong you may be forced to pay MASSIVE penalties! For example, the penalty for missing your IRA required minimum distribution is 50% of the RMD not withdrawn. The penalty for missing your Medicare enrollment deadline is an increase of 10% for each year you should have been enrolled.

These retirement dates and deadlines are critical to know and understand.

Use Your Human Resources Department

The more you learn the more prepared for retirement you’ll be. Many HR departments provide retirement education material. It’s likely to be custom-tailored to your specific retirement plan and benefits.

Get whatever retirement planning materials they have, read, and learn it! It can only help you in the quest for a beautiful worry-free retirement.

Take advantage of any counseling services provided as well. Oftentimes they’ll help you review your retirement accounts, pension plans, or any other company-specific retirement benefits. 

Be wary though! Sometimes the HR recommended “counselor” is actually a “financial advisor” looking to hawk insurance and investment products.

Click here to learn how to find the best financial advisor for your situation because the company recommended “advisor” may be a “product-hawker.” Bad financial advice from a crummy salesperson with dollar signs in their eyes can wreck an otherwise well-planned retirement!

Your HR department can explain how your health insurance benefits work in retirement. For many, benefits will simply end. For others, benefits may continue, but to what extent can vary greatly. Healthcare costs in retirement will have a big impact on your retirement planning success or failure.

You also need to know if you’re fully vested in your workplace retirement plan and any pension plans available. Some benefits pertain to employees who’ve worked there for a number of years. Other benefits pertain to company contributions to your retirement accounts.

Regardless, you need to understand your vesting schedule to know what retirement benefits you’re entitled to.

Estimate Your Healthcare Expenses in Retirement

Healthcare costs are a real bummer and they’re only going to get worse as we age. Take some time to analyze your current health status, family history of disease, and longevity.

I know this isn’t “fun” but it can help get you in the right mindset to plan for realistic future healthcare needs. 

Part of your pre retirement checklist must include getting knowledgeable on Medicare and healthcare expenses
Part of your pre-retirement checklist must include learning about Medicare and other healthcare expenses

According to Fidelity, “it is estimated that the average couple will need $285,000 in today’s dollars for medical expenses in retirement, excluding long-term care.”  

Whoa! That’s a lot of money for healthcare expenses in retirement!

Private insurance or Medicare are your primary options for healthcare coverage in retirement. Since it’s cheap you’ll likely enroll in Medicare once you turn 65 or when your employer benefits cease. 

Understanding Medicare is a big part of learning how to prepare for retirement. Medicare is composed of 4 parts – A, B, C, & D.

Here’s a high-level overview of each part of Medicare:

  • Medicare Part A is hospital insurance. Most do not pay a monthly premium for Part A. 10 years (40 quarters) of Medicare tax contributions qualify you for premium-free coverage. Premiums vary if you contributed for less than 40 quarters. 
  • Medicare Part B is medical insurance. If you qualify for premium-free Part A, then you can safely expect to qualify for Part B coverage. Part B requires enrollment and comes with a monthly premium. Some choose to defer enrollment if still receiving employer (or spouse employer) benefits. Not to worry, there are no penalties for deferral. For 2019, the standard premium is $135.50.
  • Medicare Part C – this is a value-added plan covering A & B plus additional services.
  • Medicare Part D – prescription drug insurance.

For a more extensive Medicare review visit Medicare.gov. Be sure to check-in down the road as your retirement date approaches to assure you’ve accounted for possible program changes.

Remember Medicare is for those age 65+. Retiring before Medicare eligibility will lead to really high private health insurance costs. If early retirement is in your plan, be prepared for large premium increases!

How Long Do You Plan On Living?

Of course, if you knew the answer to that you could create the perfect retirement plan. Unfortunately, none of us can see the future (although I don’t think I’d want to know anyway).

You need to have a general understanding of how long you’ll live . . . you don’t want to run out of money after all. Your life expectancy is impacted by several things such as:

  • Family longevity
  • Medical history
  • Health status

Not only do you need to “guesstimate” how long you’ll live but how long your spouse will live as well. You don’t want to leave them broke on the streets, do you? So planning for their life expectancy is also important.

The Social Security Administration has a life expectancy calculator here. There are several others available on the internet as well.

Learn Taxes, Social Security, Investing, Estate Planning & More!

Don’t shoot me, please! I’m sure you’re thinking “If I wanted to learn all of that stuff I’d have gone to school to be a financial advisor.”

I’m not saying you need to be an expert in tax law or estate planning or any other retirement topics for that matter. I’m saying you need to be familiar with the basics whether you hire a financial advisor or not.

Again, don’t worry too much because I’ve put all the Key Financial Data you need in the Retirement Mastery Toolkit along with my book “Portfolio Architect: 5 Keys To Design, Build, and Manage Your Ultimate Investment Plan”.

Glance at the financial data cheat sheet, read the book. You’ll be way ahead of your other nearly and newly retired friends. You’ll have a base understanding of core investment and tax concepts and at the very least be able to spot the red flags and warning signs.

Learning & Preparing For Retirement In Summary

These things are just the tip of the iceberg for your pre-retirement checklist. Retirement planning is so complex and variable from person to person there’s no way to point out every little detail you’ll need to know.

Use these learning topics as a baseline that everyone should consider and explore. Expand on these topics to what’s most relevant to your situation. You’ll be smarter for it . . . and your retirement will be better for it!

Pre-Retirement Checklist Step 2 – Retirement Planning

By miles, this is the most important part of the 3 steps in your pre-retirement checklist. It’s best to learn how to prepare for retirement as I discussed in the first step, and you’ll need to “try retirement” if at all possible as I discuss in the third step, but the actual process of retirement planning is by far the most critical one.

You need a plan after all! And not just any plan, but a retirement plan that ensures you’ll enjoy your the golden years of life with massive money confidence!

What is retirement planning after all?

Retirement planning is the process of matching your current and future assets and income with your expenses and liabilities including inflation factors and investment return assumptions to determine if you can actually retire successfully or not.

The retirement planning process is where the critical questions get answered, input, and tweaked to create a brilliant path to both a memorable—and purposeful—retirement.

  • What kind of lifestyle do you want?
  • Where do you want to live?
  • What kind of cars do you want to drive?
  • What do you want to do?
  • What is your plan for paying for all of this?

Every retirement checklist must include retirement planning, but most of them don’t. This is the hardest part of any retirement checklist because every retiree is so unique. These calculations are highly complex as well, which makes retirement planning challenging at best.

The main staples of your retirement planning are:

  • Your assets
  • Your income
  • Your expenses
  • Your liabilities

I’ll break those things down in greater detail.

What Assets Will Fund Your Retirement Plan?

Do you know exactly what you have and where? As years go by we tend to forget about accounts we contributed to for a short amount of time or benefits that were provided by previous employers.

You need to take an inventory of retirement assets. Where have you worked in the past? Various retirement savings options may have been available, such as a 401k, 401a, 403b, 457, or pension plans. Are there any accounts you’re missing?

Some of those retirement options are employer-funded only, meaning you could have money floating around you didn’t even contribute to. Dig deep and make sure you’re not leaving money on the table.

Now inventory the savings you’ve done on your own. Things like savings accounts, CDs, annuities, IRAs, stocks, bonds, and other investment assets.

Where are they? Who owns them (you, your spouse, jointly, in trust)? Make a list of every financial asset you have.

Finally, consider your physical assets. Your home, vehicles, high dollar toys, cabin, rental properties, etc. It’s time to start thinking about how these items can affect your retirement.

Do you plan to sell anything to help fund your retirement? Or maybe generate retirement income from a second home you won’t use anymore?

You have retirement dreams and goals which take both money and planning to achieve. Your assets are a tool to help you achieve the retirement of your dreams!

Finally, if you can simplify, now may be the time. Consolidating retirement accounts or downsizing your assets will help make the big picture more clear.

How Much Retirement Income Will You Have?

This seems super easy on the surface, but can be highly complex. How much money will be flowing into your accounts to offset the expenses going out over time?

  • Social Security
  • Pension income
  • Consulting income
  • Rental income
  • Retirement “side-hustle” business income
  • Annuity income
  • And on and on . . .

There are many forms of retirement income and it’s critical to know what you’ll get to pay for your retirement.

But it gets more complicated . . .

Social Security benefits change depending on many factors. Will you claim early? Will your spouse claim late? What combination of claiming strategies provide the maximum retirement income over your life expectancy?

Only 4% of all Social Security recipients actually maximize their Social Security retirement income benefits. This is sad . . . but true!

Make sure you carefully study your Social Security claiming options. If you need help drop me a note, we have several Social Security planning tools available to you on an hourly basis.

It’s best to get your Social Security income estimates directly from the Social Security Administration here. Remember those numbers may change slightly with inflation and if you work through your full retirement age or not.

For a quick Social Security estimate click here. it’s a rough estimate and there are many factors, but it will get you close.

Most pension incomes have multiple claiming strategies available as well. Do you claim 100%? Life with period certain for 10 years? Life with 75% to your spouse?

These pension claiming strategies can “make or break” your retirement (and keep your spouse out of the poor-house after you die!)

And what about your rental income? Or annuity income? All of these sources of money must be accounted for and matched up with your future expenses over time. To make things more complicated you need to include inflationary increases (or lack thereof) for accuracy.

Retirement planning is so difficult it can’t be done on a napkin, and I laugh at the “one-page retirement plan” blog posts out there. To truly master your retirement planning you need highly sophisticated retirement planning software.

The problem is most retirement planning software is either watered down, designed to sell you an insurance or an investment product, too expensive for the average retiree to buy, too complex for the average retiree to use, or all of the above!

The best retirement planning software is complex enough to calculate your variables over time, yet easy to understand. It’s functional, practical, accurate, and reliable.

I wouldn’t risk my retirement on anything less than the best retirement planning software. There’s just too much to lose! But it comes with a price.

You can pay a financial or retirement planner to create a plan for you, but is that advisor trying to hawk a product or help you navigate retirement challenges?

You can spend thousands of dollars on retirement planning software, but then you need to know the nuances of creating a brilliant retirement plan with that software.

You can use a simple retirement spreadsheet calculator (like the one in my Retirement Mastery Toolkit), but it can’t possibly cover every aspect of your planning, it’s simply meant to give you a general idea.

It’s worth your time and investment to have a qualified fee-only fiduciary financial planner create and manage a retirement plan for you. This one-time investment can literally save your entire retirement!

If you don’t have access to a real financial planner, your best bet is to run as many retirement calculations as possible using every possible retirement planning tool you can find on the internet. They’ll all have their own nuances and provide varying information, but it’s a must if you want to really create a retirement plan you can generally rely on.

Estimate Your Ongoing Retirement Expenses

You also need to create a retirement budget. Don’t worry, I created one for you in my Retirement Mastery Toolkit. You may want to download it now if you haven’t already.

Your retirement budget will include your financial needs like mortgage payments, utilities, food, and clothing. It should also include your wants like travel and entertainment. Finally, it will include any wishes like leaving a charitable legacy or gifting money to family each year.

How Much Debt Do You Have?

It’s best to enter retirement with as little debt as possible. It reduces your “monthly nut” and provides long-term financial stability.

Here is some general guidance on how to prioritize your debt reduction plan:

1. Eliminate high-interest revolving debt first – Credit card debt is a retirement killer . . . don’t let this one follow you into retirement. You may need to revise your current spending habits to free up cash and pay down debt, but you should never carry a credit card balance in retirement.

2. Pay off loans – Auto loans, student loans, and personal loans should be eliminated. Putting those debts behind you will help you transition into retirement with less stress.

3. Pay off your mortgage – Very few people—maybe 20% of the population—will itemize deductions on their tax return. This means for most people mortgage interest is NOT a benefit! If you’ve conquered numbers 1 and 2 above; then paying off your mortgage prior to retirement is doable. Carrying a mortgage into retirement isn’t a death knell, but it certainly helps if you don’t have one and opens up opportunities for a reverse mortgage.

Retirement Planning In Summary

Retirement planning will help you squeeze every last dime from your finances by exploring money maximizing ideas such as:

  • Delaying Social Security for the highest payout
  • Converting IRA to Roth IRA to slash your lifetime taxes
  • Increasing (or decreasing) your investment risk over time
  • Creating a “bear bucket” so you can buy stocks during market crashes
  • Coordinating your retirement income streams to minimize your taxes
  • Implementing annuities to reduce longevity risk (I’m generally not a fan but they should be considered)
  • And much, much more!

The point is there are several things the average retiree simply doesn’t think about. Why would they after all? But these strategies can really maximize your retirement planning and provide that “money confidence” so many retirees lack today.

Retirement planning is the most important part of your journey through retirement. After 25 years of helping clients retire and seeing the mistakes they made I cannot understand why anyone would retire without a comprehensive retirement plan. That’s why retirement planning is a solid #2 on the pre-retirement checklist.

Pre-Retirement Checklist Step 3 – Try Retirement First

So you’ve learned how to prepare for retirement with knowledge as your guide, you’ve done the retirement planning analysis, and now you feel good about retiring. Not so fast!

Some experts recommend easing your way into retirement. For example, you could work part-time during your last working year and use the extra time to begin new activities. This way you won’t be hit with a drastic change. And yes, some people will choose to continue to work, especially at a very enjoyable job. Plus, the structure and socialization can be beneficial to your overall well-being.  

I don’t like surprises. My wife says I’m boring, and that’s a fair assessment. But I like to have things planned out especially when it comes to retirement.

Once you retire, you can’t earn it again, so why not take retirement for a test drive?

What I mean by “trying retirement first” is put yourself in that rocking chair with a cup of coffee and the paper each morning and see how you feel.

JUST KIDDING! There’s more to it than that. Here are some concepts to consider.

Test Your Retirement Budget

One goal of trying retirement first is to test your retirement budget. You should have a very clear understanding of your expected retirement expenses by this point in the pre-retirement checklist.

Try that budget out for 6 months! See if you can stick to it.

In the decades I’ve been helping people through retirement the majority of people spend MORE than they said they would. This is one of those “critical mistakes” that will destroy your retirement I mentioned before.

You can test your retirement budget by micro-managing every expenditure OR by trying the “anti-budget” I mentioned here in creating a retirement budget.

Either way, you’ll know if you can live on your retirement budget or not.

Since you’re still working separate out those work-related expenses such as gas to work and a new suit etc. You may not eat out as much, you may not attend as many events or gatherings, so make sure you adjust your budget accordingly.

If you find you’re spending more than you thought you would update your retirement planning as I mentioned in Step 2. You may need to delay retirement if you underestimated your expenses.

The flip side of that is you may be able to retire sooner if you find you’re spending less than you’d thought. That’s not a bad deal at all!

Test Your Tolerance For “Emptiness”

I’m not trying to suggest your retirement will be empty, but I wanted to grab your attention.

We envision retirement as trips and travel and fishing and golf and hobbies and volunteering and family and friends . . . you get the point. We have this vision of “Life will be great when I retire” when the fact is life can get pretty boring going from a 45 hour a week job to golfing a few times a week.

If your social center is based even in part on your work friends, how will retirement change those relationships? Will you miss the work parties or evenings after work at dinner? Will you miss the work travel to fun events or just hanging out at the water cooler talking about the Golden Knights game?

Most of your retirement will be relatively quiet. You can’t travel half the year or play golf every day. You may get bored watching the news and reading the paper. Is it better to put retirement off a bit? Will you go “stir crazy?”

Of course, you will be having more fun times with your hobbies and travel and family because you’ll have more freedom. But does the boredom outweigh the freedom?

Test Your Vision Of A Dream Retirement

Benjamin Brandt is a fee-only financial advisor in North Dakota and has studied the concept of practicing retirement for years. I interviewed him for the Wealth Summit I held a few years back, and while the thought of practicing retirement isn’t revolutionary, Benjamin had some great spins on the concept.

The “Try Retirement” concept is basically to stop making your retirement plan contributions and use that money to enjoy life doing the things you would if you were retired.

How will you do that if you’re working you ask?

Most people have a substantial amount of vacation time built up. That’s one way you can shorten your workweek or work year. Other people have more annual vacation allowance and flexibility later in their careers.

That’s another way you can shorten the time spent working and increase the retirement-like fun time!

But how will I get the money to spend like I’m already retired you ask?

Stop contributing to your retirement!

If you’re chunking away 20K a year into your 401k stop it! Use that money for trips and fun, BUT MAKE SURE you run your retirement planning numbers to see how this changes your retirement date. You may be perfectly fine working another year or two because you’re enjoying “semi-retirement” and using the extra cash for fun!

By practicing—or “trying”—retirement you can learn a lot of things about yourself, your finances, and your ability to live the retirement you’ve dreamed of without dying broke.

Here are some more benefits of “trying retirement”:

  • Delaying Social Security – If you’re trying retirement you’re likely working a bit longer and therefore hopefully delaying the claiming of Social Security benefits. Those benefits increase by 5% to 8% per year depending on the age you claim them. Net result – WIN! You’ll have a higher Social Security benefit.
  • Keep your employer benefits longer – If you’re still employed (but taking more time off of work for fun) you should be able to keep your health insurance and other employer benefits. Net result – WIN! Private health insurance is outrageously expensive, and every year you can stay on your employer’s health insurance will likely be a massive financial gain.
  • Reduce your time in retirement – You’ve still got income so you don’t need to worry about drawing down your financial assets as soon. It effectively shortens the amount of time you’ll need to draw from your portfolio and other retirement income sources. Net result – WIN! Drawing less money earlier in retirement will help sustain your portfolio and fund your goals over time.
  • Your money is still growing – The longer it takes you to fully retire and draw from your investments the longer those investments can grow. Net result – WIN! More money growing compounded for longer periods of time is always a retirement win!
  • You get to figure out your “retirement why” – What is retirement really all about anyway? If it’s fun and hobbies and travel, great! If it’s volunteering at the pet shelter or church that’s fantastic as well! Maybe it’s reading to kids or enrolling in classes at the local college. All of those things are fantastic, but the point is you should use this time to figure out what really makes you tick! Net result – WIN! What could be better than using time BEFORE retirement to refine what life really means to you IN retirement?

Pre-retirement Checklist In Summary

It’s simply not possible to cover every aspect of your “pre-retirement checklist” because you’re unique! You have your own set of finances and goals and dreams for the future.

I do hope however that you consider the three steps I’ve laid out in this article as a good foundation for your personal retirement planning. Learn what you need to know (or at least be familiar with). Create a retirement plan that works for you. Finally, give retirement a try before you actually pull the trigger.

Follow those three steps on my pre-retirement checklist and you’re surely going to be better off than your friends who didn’t!

Frequently Asked Questions

What is a pre-retirement checklist?

A pre-retirement checklist is a guide used to help you prepare for retirement. It typically covers topics that affect your retirement such as taxes, investments, insurance, estate planning, assets, income, expenses, and liabilities.

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