If you want to do retirement right, you’ll need a checklist. But what tasks should be on your pre-retirement checklist? Here’s what experts had to say.
Are you sure you want to retire? First, revisit your retirement date. “For some, making a decision to stay on the job an extra year or two beyond your planned retirement date will enable you take advantage of your company’s match in your 401(k) plan, delay triggering Social Security to maximize monthly payouts later, and accumulate more money in your savings,” says Sandra Timmerman, a nationally recognized gerontologist.
Can you afford to retire? Dead set on your retirement date? Determine whether you can afford to retire — whether you’ll have sufficient income and assets given your household’s retirement expenses and liabilities.
To do that, create a financial plan, and stress test it. What will your sources of income will be in retirement; how much can you expect from each source and for how long? The average retiree has income from Social Security, wages, retirement accounts such as IRAs and 401(k)s and, for some, a pension.
Visit the Social Security Administration’s “my Social Security” website to get your benefit estimate and earnings statement, says Stuart Michelson, a finance professor at Stetson University and editor of the Financial Services Review. Review, too, your company’s retirement benefits, including your pension, 401(k) or other retiree benefits.
Figure out not just your gross income, but your after-tax income and whether you can live on that. “I’ve seen so many situations where people look at the amount of their retirement benefits and compare that to their take-home pay,” says Larry Frank Sr., a financial adviser with Better Financial Education in Roseville, Calif. “Big mistake since the retirement benefits, be they from a pension, Social Security, and/or their 401(k), 403(b), 457 and the like are in gross dollars.”
Create an investment plan. “Make sure your portfolio is designed around the rest of your lives, and not just hitting the retirement date,” says Carl Richards, director of investor education for the Bam Alliance in Park City, Utah. “Because the goal for so long has been to retire, and most people have been so focused on that goal, they fail to realize that life goes on, and the whole point of saving and investing over decades is so there will be enough money in retirement to live.”
Do a dry run. Determine whether you’ll have enough income to support your desired lifestyle in retirement — before you retire. “While you’re still working, and it looks like you will have less to spend in retirement from all sources compared to working, then practice the transition first,” says Frank. “You do this by saving more, which equals spending less.”
If you can successfully live on less, then you’ve shown yourself you can retire as planned. “If you can’t, then you need to work longer,” says Frank.
What will your expenses be in…