Your Retirement Checklist and To-Do List

Many aging adults get anxious about the approach of retirement. Lifestyle, spending habits, and income sources could shift and impact retirement plans in dramatic ways. So, it’s natural to wonder about what “to-do’s” to include on the retirement checklist. By planning ahead, investors can mitigate concerns, and develop a better sense of when to retire and how they’ll manage their finances as they enter a new life chapter.

Retirement planning: what to do to before retirement

Many experts suggest that a person needs a steady stream of 70% to 80% of current income to have enough to sustain their lifestyle in retirement. This income can come from multiple sources: 401(k) plans, individual retirement accounts (IRAs), other savings and investments, rental income, part-time work, and Social Security. Figuring out whether one has enough money saved to retire takes advanced planning even  before being eligible for retirement and hitting key milestones on one’s retirement checklist to help meet income and cost expectations in this next act. 

1. Assess personal financial needs

Start by taking a snapshot of current income, debts, spending, and net worth. Estimate the likelihood—and extent—these might change. Consider anticipated lifestyle changes: Downsizing? Traveling more? Moving to a more or less expensive area? Also, consider any new expenses that might arise in retirement.  

Tally up the expected cost of living in retirement including housing, food, health care, taxes, entertainment, and travel. Distinguish between fixed costs and variable ones that fluctuate month-to-month. 

If possible, work to enter retirement debt-free. Paying off any debt outstanding means that retirement benefits can go entirely towards living expenses.

Side note: Try Titan’s free Retirement Calculator to project how much you'll need in retirement.

2. Figure out Social Security benefits

Before deciding on a retirement date, individuals can research their estimated monthly benefit through the Social Security Administration’s My Social Security site, where they can test various scenarios:

• How does age impact benefits?

  In the eyes of the Social Security Administration (SSA), the full retirement age is between 65 and 67, depending on birth year. The longer a person waits to stop working, the higher the benefit. By waiting until age 70 to start collecting, beneficiaries can maximize their Social Security payments. Still, there are personal factors that could impact the decision to receive benefits at a younger age. You can start collecting benefits as early as age 62. ‍

• What if you stay employed?

  Working won’t prevent you from receiving Social Security benefits, but it could have an impact on the amount received, depending on whether you’ve reached full retirement age. Those who keep working (but are below full retirement age) and earn more than the SSA’s earning limits receive reduced benefits. Once someone reaches full retirement age, however, SSA recalculates the benefit amount to account for any months not receiving the full benefit. ‍

• What is your anticipated life expectancy?

  If health conditions and longevity are a concern, you might consider taking Social Security before full retirement age. Alternatively, if you’re healthy and there’s a chance of outliving your pension or annuities, waiting until age 70 to maximize the benefit could be an option.  

3. Understand how Medicare works

At age 65,  people who have been paying Medicare taxes throughout their working years are eligible to enroll in Medicare. Three months before turning 65, individuals can apply for Medicare Part A (hospital insurance) and Part B (medical insurance). Waiting longer to sign up may incur a late enrollment penalty, unless you are still working and receiving medical health insurance. Retirees might consider alternative health-care options before going on Medicare, and after.

• What happens if you retire before age 65?

  It could be helpful to have another health insurance plan in place as a safety net with hospital and medical coverage until Medicare kicks in. 

• Do you need or want supplemental insurance?

  Since Medicare may not cover all costs for copays, hospital stays, and long-term care—which can be costly—consider a supplemental insurance (Medigap) policy. According to the Department of Health & Human Services, on average, a person turning 65 today has a nearly 70% chance of needing long-term care at some point in their retirement years. Individuals might want to consider researching options for supplemental insurance and long-term care insurance to cushion those costs.  

4. Determine your retirement withdrawals

On the income side, individuals can draw from a mix of sources: Social Security benefits,  retirement plans such as 401(k) or 403(b), pensions, retirement savings accounts such as traditional IRAs and Roth IRAs, dividends, and part-time work. The mix could fluctuate over the years, and income amounts vary depending on withdrawal requirements and life situations. In early retirement, for example, a person might wait before taking Social Security and draw from other income sources first. 

As you approach your 70s, required minimum distributions (RMDs) come into play. As the name suggests, these are withdrawals you’re required to take from certain retirement accounts.

• For traditional IRAs, SEP IRAs, and SIMPLE IRAs, RMDs start at age 70 ½ (if born before July 1, 1949) or 72 (if born after June 30, 1949).  
• The IRS’s handy comparison chart of RMDs for IRAs and defined contribution plans can be a helpful forecasting tool. 
• Roth IRAs do not have required minimum distributions.

5. Consider consolidating accounts

Before taking early retirement, some people over age 59 ½ might want to consolidate accounts through a direct rollover from a 401(k) to a traditional IRA, a process where the original custodian of retirement funds “rolls over” funds directly to the new custodian without going through the account holder. The direct rollover is done to preserve the tax deferred status of the funds, but it must be accomplished within 60 days to avoid penalties and taxes. 

Alternatively, in an indirect rollover, funds are sent directly to the account holder, who then can invest funds into an account. This can be trickier to manage, so reviewing options with a financial planner or advisor may be helpful in determining whether to consolidate accounts or not.

Income strategies outside of retirement accounts 

It’s common for investment priorities to change upon retirement, so income strategies can also shift. Anticipating the kinds of investment and income options available can help prepare retirees to adapt to possible changes. These can include:

• Portfolio diversification.

  Some people switch from a long-term growth investment strategy to an income investing strategy when entering retirement. This kind of portfolio diversification prioritizes a more steady flow of income. 

• Rebalancing investment categories.

  The different investment bins can be rebalanced as needed. For example, some money might still go into growth stocks, just less of it. More assets could go into other categories such as bonds, alternative investments like real estate, and cash. 

• Using the total return portfolio strategy.

  This lets an investor take out a percentage while preserving the goal of a long-term rate of return. Many options are available—income mutual funds, closed-end funds, and dividend income funds, to name a few. Investors can discuss the possibilities with a qualified financial advisor. 

• Incorporating a Social Security strategy.

  For those who want to retire early and have pensions or annuities to draw from, it can make sense to wait until full retirement age, even age 70, to receive the highest possible benefit. Others might wish to take the retirement benefit earlier than full retirement age and invest the benefit, letting it grow while still employed. ‍

• Leveraging Health Savings Accounts.

  Some savers will contribute pretax dollars to Health Savings Accounts (HSAs), then use them for long-term medical expenses in retirement. Money used for qualified medical expenses can be withdrawn tax-free. After age 65, HSA money saved can be used for nonmedical expenses, too, without penalty. Some investors max out contributions and invest for the long-term, and the HSA will eventually become part of an investor’s retirement income stream.

What to do after retirement

Does the planning cease after retirement? Not exactly. There are plenty of financial issues to continue monitoring. 

• Balancing income and expenses.

  If expenses to support lifestyle are draining savings too quickly, a person might consider making spending cuts in the non-fixed areas of the budget. Or, they might take on part-time work to boost monthly income in retirement.

• Rebalancing when necessary.

  Careful tracking of investments and market conditions might require a retiree to rebalance investments. 

• Estate planning.

  The need to revise the estate plan could come up, including the will, advanced health- care directive (living will), trust, powers of attorney, life insurance, and estate tax planning. 

The bottom line

Developing a retirement plan is about getting prepared for the momentous changes in lifestyle and finances during the golden years. There are many moving pieces on the retirement checklist, and priorities can change as one moves from retirement’s early stages to later stages. 

Among the most important items on the checklist are solving the Social Security puzzle, developing a health-care strategy and budget, and determining optimal times to take withdrawals from various income sources. 

Doing the research and developing a personalized retirement checklist might help ease any possible anxiety about this next chapter in life. To further boost confidence, some people seek the expertise of a financial advisor.