The thought of retirement brings joy and excitement . . . it should after all!  That trip to Napa, hitting the links on a weekday, spoiling grandkids, cruising with the top down; if you’re asking yourself “Can I retire yet?” then the freedom of retirement is on your mind! 

Amidst those daydreams is an anxious feeling of whether you’ve prepared enough to actually cash in for freedom. This article serves as a quick pre-retirement checklist to guide you upfront and help ensure a worry-free retirement.

1. Pre Retirement Checklist – Initial retirement planning

Educate yourself – You’ve already started if you’re reading this, great job! Even if you decide to hire a professional, like a qualified and certified fee-only fiduciary financial advisor, you should still educate yourself on the basics – after all, it’s your retirement!

Keeping retirement strategies at the forefront will help you reach your goals. Consider reading up on retirement planning. Here are a couple of suggestions:

Talk to your Human Resources department – If you are an employee, many HR departments provide retirement education material. Take advantage of any counseling services provided to review your retirement accounts, pension plans, or any other company-specific retirement benefits. 

Never assume you have a retirement benefit coming your way, get the facts so there are no surprises down the road.  

Understanding how your health insurance benefits work after retirement is crucial. For many, benefits will simply end. For others, benefits may continue, but to what extent can vary greatly. The expense to you is also something you need to determine and one that will have a massive impact on your retirement planning.

Learning whether you’re fully vested in your workplace retirement plan is also important. Some benefits pertain to employees that have worked at your place of employment for a certain number of years. Others pertain to company contributions to your retirement account—some of those may not actually be yours until you’ve dedicated a required number of years with the company.

Pay off debt – As you transition into retirement your income to expense ratio will inevitably change. Every individual is different, but you’ll likely see a decrease in income—no surprise there.

At the same time, you may encounter higher expenses in retirement (like healthcare costs and entertainment). It’s best to eliminate debt prior to retirement so you are not unnecessarily cutting into your income.

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

1. Eliminate high-interest debt first – truly dig in and eliminate it. Credit card debt is the top example, don’t let this one follow you into retirement. You may need to revise your current spending habits to free up cash to pay down debt.

2. Pay off loans – auto loans, student loans, personal loans. They all count and putting them behind you will ease your transition into retirement.

3. Pay off low-interest debt – like your mortgage. If you’ve conquered number 1 and 2; then paying off your mortgage prior to retirement is absolutely doable. Imagine life without a mortgage payment – use that thought as fuel to attack your debt head-on. 

Asset inventory and simplification – Do you know exactly what you have and where? Over the years we can forget about accounts we contributed to for a short amount of time or benefits that were provided by previous employers.

Let’s take an inventory. Think back to all employment positions you have held – various retirement savings options may have been presented, such as a 401k, 401a, 403b, 457, or pPension plans.  

Now review the saving you’ve done on your own: savings accounts, CDs, annuities, IRAs, stocks, bonds and other forms of saving.

Lastly, 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 one of them like a second property can generate retirement income?

Calculating the sum of your assets provides a starting point in knowing where you stand in meeting your retirement goals. If you can simplify, now may be the time. Consolidating retirement accounts or downsizing your assets will help make the big picture more clear.

Investment health/maintenance – Are you overexposed to risk? As you approach retirement your level of investment risk should decrease to assure the funds are there when you need them. Are you properly diversified? We all know to not put all our eggs in one basket.

If you haven’t reviewed exactly what you’re investing in lately, it’s probably time to schedule a meeting with a financial advisor. Your investment strategy should change as you age, having someone help keep an eye on your accounts can pay off in the long run.

Plan your estate – Estate planning is not just for the super-wealthy or the very old. It is the best way to protect all of your assets. 

You also want to assure you can pass along assets to your loved ones. Documenting your wishes is also important for healthcare-related matters.

It goes beyond just a will. Having a plan will take the burden off of your family when you’re either not able to make decisions for yourself or you’re no longer around to provide guidance.

Boost your savings – Just like in pre-retirement life, unwanted and unplanned expenses can pop up – don’t let it ruin your retirement or force you to tap into different income sources too early.

Have a solid emergency fund. Consider a high yield savings account or short term high-quality bond funds. I tend to recommend our retired clients put their emergency funds in Ally Bank but there are other good options depending on how big your emergency funds are like MaxMyInterest which I’ve seen at several industry conferences.

2. Pre Retirement Checklist – Retirement expenses

Make a plan – What kind of lifestyle do you want? Where do you want to live?

What do you want to do? Are you going to continue to work? Volunteer? Travel? What is your plan for paying for all of this?

Ok, that was a lot to think about. But knowing your expectations of retirement is necessary to wrap your head around the expenses you’ll have. The lifestyle of morning walks with the dog and day trips around your home state will likely cost far less than annual trips abroad or fancy sports cars. 

Communicating these expectations to your partner or financial advisor is also necessary to assure those on your team are working towards the same goal!

Estimate expenses – you may still have a mortgage and utilities won’t go away. Insurance and healthcare will also always be around. Don’t forget those bills as you formulate a budget.

Downsizing may be a smart part of the equation for many reasons. Your expenses should decrease and there’s less to manage on a day to day basis.

Check out this very simple expense calculator from Vanguard to help get you started.

3. Pre Retirement Checklist – Healthcare in retirement

Healthcare costs are a real kicker and are bound to increase as we age. Take some time to analyze your current health status, family history of disease and longevity.

Although not fun, this exercise 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 getting knowledgeable on Medicare and 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.”  

Private insurance or Medicare are your primary options for healthcare coverage in retirement. Due to its affordability, most will choose to enroll in Medicare once they turn 65 or when their employer benefits cease. 

Understanding Medicare is part of being educated. Medicare is composed of 4 parts – A, B, C, & D. Here’s a high-level overview of each:

  • 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 Be sure to check-in down the road as your retirement date approaches to assure you’ve accounted for possible program changes.

Keep in mind, Medicare in its most common applications is for 65+. Retiring before Medicare eligibility can lead to high health insurance costs. If early retirement is in your plan, be prepared for large premium increases.  

4. Pre Retirement Checklist – Income & taxes in retirement

Income in retirement will likely come from a variety of sources, where will yours come from? And we can’t discuss income without remembering taxes.

Review this list to get a gauge on how much income you will have available in retirement (and what part will go to Uncle Sam).

  1. Social Security – You’ve been paying Social Security taxes all your working life, but you may be wondering how much you’ll actually get for yourself. Your benefit will vary depending on your income and the number of years you’ve contributed to the program. Use the Social Security Quick Calculator to estimate the benefit you will receive.
  2. Retirement Savings Accounts
    1. Tax-deferred investments – It’s finally time to start thinking about your Traditional 401k and IRA accounts you’ve (hopefully) been contributing towards. Income tax is paid when you withdraw funds. Keep in mind, if taxes are deferred until retirement, there will be a penalty for withdrawing before age 59 ½, early withdrawals are highly discouraged. On the contrary – you need to make minimum withdrawals once you hit 70 ½; the minimum withdrawal is required annually here on out. Failing to withdraw in time could have you paying steep tax penalties.
    2. Roth accounts – Taxes are paid upon deposit into Roth accounts.  You will be able to withdraw all funds tax-free. One less thing to worry about!
    3. Strategy for withdrawing funds – Traditionally, withdrawing from taxable accounts first is the way to go, then tax-deferred accounts, and lastly Roth accounts. This allows your tax-deferred accounts to continue to grow during your retirement. Withdrawing from Roth accounts last means you’re no longer paying income tax later in retirement when tax rates may be higher than when you first retire. Another strategy would be to withdraw a portion of your needs from each account – this allows for a more even tax bill over many years. If you’re unsure you may want to discuss with a financial advisor to build a plan around paying the least amount of tax on your hard-earned money.
  3. When is a Roth conversion a good idea?  Maybe you’ve heard about tax savings associated with converting accounts, but be aware that timing is key to reaping tax benefits. If you’re nearing retirement, you’re advised to leave funds where they are. A Roth conversion means you’re withdrawing from a traditional tax-deferred investment account, paying the taxes, and reinvesting into a Roth. The goal of conversion is to ultimately pay less tax. There are also timelines you must abide by for withdrawing after a conversion. Speak to your financial advisor and tax specialist about this potential strategy.
  4. Continuing to work – Do you see yourself picking up a side gig in retirement? Working, even part-time, can add a substantial amount of income. This will allow your savings to continue to grow and will help deter boredom while keeping your mind sharp!  Working in retirement isn’t for everyone. Keep in mind you may reach a point where you’re unable to work at which point you’ll have to rely 100% on your other forms of income. It’s smart to avoid reliance on work if you’re able.
  5. Real estate – Investments in real estate have stood the test of time.  They can provide a steady stream of income. Although real estate can be a great form of passive income – remember they do at times require work. Hiring a management company is always an option but will cut into your income.
  6. Annuities – If you want a reliable and steady stream of income during retirement, annuities may be great for you. Your investment (plus gains) will be paid back to you in predetermined increments. The guarantee of income can be very appealing. The drawback is the rate of return is often low compared to other investment strategies and should you die before you’re fully paid out it’s likely your heirs would receive nothing or very little of your remaining investment.

How does this compare to what your needs and desires are for retirement income? If you are struggling to see how to meet your desired income level, talk with your fiduciary financial planner. 

5. Pre Retirement Checklist – Physical and mental health

Health is wealth – and you’re bound to learn this lesson first hand in retirement. Research shows that physical and mental wellbeing decline once a person reaches full retirement. This is just a reminder that in addition to having a robust financial plan, it’s essential to have a plan for your health.

Major retirement-related health concerns are depression and reduced exercise. Have a plan to combat both by thinking about what you will do with your time.

Respondents in a Harvard Medical School study of retirees who reported their retirement as enjoyable found that certain activities are essential:

  • Keep learning new things
  • Play
  • Be social
  • Set goals

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.  

Take advantage of resources if you are not sure what you are going to do with your time. Your health insurance may offer health and wellness coaching or counseling. 

There are also plenty of free community resources in most towns and cities. Now is the time to consider healthy hobbies and focus on relationships with family, friends, and neighbors.

Be sure to bookmark this article so you can refer back to it in the future.  Taking action in the various topics discussed will help you feel confident heading into retirement. Plan today so those retirement daydreams become tomorrow’s reality!