The Retirement Readiness Checklist

Transcription

1 The Retirement Readiness Checklist Grant Bledsoe, CFP, CFA

2 Published By: Above the Canopy & Three Oaks Capital Management Copyright 2017 Above the Canopy. All Rights Reserved. May be shared with copyright and credit left intact. Page 1

3 About Us Above the Canopy's mission is to help people make consistently smart nancial decisions. Our content covers many of the important aspects of nancial planning and investment management you'll face over the years. We love to work with: Entrepreneurial people & families. This mostly includes business owners & executives, physicians, attorneys. Small to mid sized businesses. We help build and manage 401(k), 403(b), profit sharing, and other retirement plans. People of all ages, ranging from couples navigating toward retirement, to graduates starting their careers, to retirees looking to preserve and distribute their assets efficiently. People seeking to reduce stress when it comes to financial decision making. People seeking to simplify their life by organizing and optimizing their finances. If you're new to Above the Canopy, explore any of the blog posts or articles on our site for free. You'll nd content on nancial planning, investment research, economic issues, entrepreneurship, and business management. We love our community & readers as well. If you have special questions or issues you'd like us to answer, feel free to reach out. We're happy to point you in the right direction. Page 2

4 Retirement Readiness Checklist Making the leap into retirement is a massive step. Not only are you transitioning from building your savings to spending it down, but the change in your day to day life will be unlike anything you've experienced before. I put together this checklist to help people approaching retirement get their "ducks in a row". If you can mark everything off of this checklist, you'll have a great head start on your own personal leap into retirement. And as always, please feel free to reach out to me directly if you have any questions about your own transition into retirement. Page 3

5 1. Make a Retirement Budget The rst step to knowing whether you have enough saved up to retire is determining how much you expect to spend each month after you stop working. Make sure you account for expenses you currently have that will stop (like your mortgage), as well as those you don't currently have, but will in the future (like healthcare or additional travel. Be sure to check out our Smart Budget Planner if you need some help constructing your retirement budget. 2. Determine Your Options for Health Insurance Whether it be Medicare once you turn 65, private insurance, or continued coverage through your employer, healthcare is one of the most important "loose ends" to tie up. Healthcare will be one of your bigger expenses throughout retirement, so knowing how you'll be insured and what coverage you'll have is a big piece of the puzzle. 3. Decide When & How to File for Social Security When and how you le for Social Security bene ts has a huge impact on the monthly check you'll receive. Make sure you know exactly how you'll le, when you'll le, and what your bene ts will be once you do. With some planning and forethought, you can boost your lifetime benefits by a surprising amount. Page 4

6 4. Make a Decision About Your Pension If your employer offers a pension, there's a good chance you'll have some decisions to make surrounding how to collect your benefits. Many employers offer lump sum payouts in addition to lifetime annuities. The best decision for you will depend on some math, the other components of your retirement plan, and personal preference of course. When making decisions surrounding your pension, make sure to incorporate the tax impact of your decision. Most bene t payments are taxable as income, and will probably be material to your decision. 5. Learn How Your Income Will Be Taxed The impact of taxes shouldn't be isolated to your pension & Social Security benefits. Taxes play an important role in retirement - especially today, as most Americans have built up a signi cant amount of their savings in tax deferred 401(k)'s and IRAs. Make sure that you know how much you'll need to draw from your accounts pretax, in order to produce the income you desire after-tax. Page 5

7 6. Make a Retirement Income Timeline It's easy to assume that your spending will remain steady throughout retirement. But as easy as it'd be build a plan around $100,000 per year in consistent retirement spending, that's very rarely accurate. We know you'll need to buy groceries every week. But how often will you need a new car? How often will you travel? Spending in retirement tends to be a little lumpy. If you have expenses you know will pop up in certain years, it's best to incorporate them in a spending timeline. 7. Make a Retirement Income Strategy Now that you know when & how much income you'll need to draw in retirement, where will it come from? Which accounts will you spend from rst, and how with your withdrawals be taxes? Retirement income strategies should always be built with an eye on minimizing taxes. They can get complicated though, which is why many people seek the help of a professional. Page 6

8 8. Plan for Emergencies What happens if there's an unexpected medical expense? What about maintenance on your car or the house, or some other unforeseen emergency? How much do you have saved in an emergency fund, and how quickly can you access the funds? Making sure you can weather the storm no matter what the future throws at you is an essential step to take before you give up your income. You should always have enough cash in a liquid account you can access when necessary. 9. Make a Long Term Care Decision Long term care insurance is a big issue for retirees today. Recent statistics tell us that between 50% and 70% of us will need long term care services at some point in our lives. Not everyone will need to purchase a policy, but if you do it's better to do sooner than later. The longer you wait, the more likely it is you'll need care, and the higher your premiums will be. Page 7

9 10. Figure Out the Logistics How will you make withdrawals from your 401(k) or IRA? What forms do you need to fill out? When do you need to schedule an orientation call with your local Social Security office? These are some of the logistics you'll need to gure out in order to tie up the loose ends. They may not seem important, but they can be overwhelming if you have to tackle them all at once, when you're under pressure. Best practice is to cross your t's and dot your i's well before you'll actually need to. 11. Stress Test Your Plan What's the worst that could happen? Before leaping into retirement, it's helpful to "stress test" your plan. Just to make sure you can remain nancially independent no matter what, stress testing will apply the worst possible market conditions to your portfolio and retirement income plan. This type of analysis is best done with nancial planning software. Most software today can easily run thousands of "monte carlo" simulations that put the screws to your plan. If the numbers still work in the worst scenarios possible, you're in great shape. Page 8

10 12. Do a Dry Run! The last step everyone should take before jumping into retirement is doing a dry run. Take at least a week off from work, and schedule a "mock retirement stay-cation". Rather than traveling, stay at home and test out the day-to-day schedule you envision after you stop working. Work within your retirement budget, and see how the experience suits you. Many people are surprised to nd out that they don't care for the unstructured environment away from work or sudden proximity with their spouse. These are very real challenges, and important to address before you take the leap. Page 9

11 Unanswered Questions? It's my sincere intent to provide valuable, premium content in the guides I publish. However, I realize that sometimes I may raise more questions than I actually answer. If this is you, feel free to reach out to me directly with any questions or issues you may have. I'm happy to point you in the right direction. Best Regards, Grant Bledsoe, CFP, CFA Click Here to Grant Page 10

12 Disclaimer The information in this guide is provided AS IS and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Three Oaks Capital Management (referred to as Three Oaks Capital ) disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement and suitability for a particular purpose. Three Oaks Capital does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or nonsecurities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Three Oaks Capital be liable for any direct, indirect,special or consequential damages that result from the use of, or the inability to use, the materials in this guide, even if Three Oaks Capital or a Three Oaks Capital authorized representative has been advised of the possibility of such damages. In no event shall Three Oaks Capital Management have any liability to you for damages, losses and causes of action for accessing this site. Information in this guide should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized. Page 11