A Retirement Checklist for Everyone

retirement checklist

A Retirement Checklist for Everyone

Retirement. For those just starting their careers, it seems like some far-off fantasy world where you amassed enough money to never have to work again.

For those approaching retirement age, though, it becomes increasingly important to go through a retirement checklist and start making some solid plans on how you can make retirement a reality.

To help you prepare for retirement, I put together a retirement checklist. Retirement planning is a huge undertaking and I by no means expect this to be an all-encompassing list. Instead I hope that this hits on the major things that should be considered when putting together a plan for achieving retirement.

  • Work as a team – bring your spouse into the conversation. If you’re married, it’s essential that you go through a retirement checklist together. Some things can be done on your own, but conflict can quickly arise when a couple has a different idea of what retirement looks like.If you’ve seen the show Parenthood you are familiar with the struggles Zeek and Camille Braverman experienced when they reached retirement. Zeek saw them staying in their large house, while Camille saw them downsizing to a condo so that they could have the time and money to travel and experience culture. This is a clear example of how important it is to be on the same page as your spouse when it comes to retirement.
  • Choose a target retirement date. Typically people target retirement at the age of 65. That doesn’t mean you have to target that date, though, as some people retire younger and some continue working well into their 70s. It’s a matter of personal preference.
  • Take an inventory of assets. Your assets are what will fund your retirement, whether through converting them to cash, using them to generate passive income, or some combination of the two.It’s difficult to know whether you are on track for retirement if you don’t know how many assets you have. They include:
    • Retirement Accounts
    • Home & other Real Estate
    • Other investment accounts
    • Cash Savings

    You may have other assets, but this list will make up a majority of the assets that most people have heading into retirement.

  • Figure out where income will come from in retirement. Since you will no longer be working when you retire it’s essential to figure out where your income will come from in retirement.There are a number of different ways to finance your retirement. Social security is one source of income in retirement, but should not be relied upon as the only source of income. There is also passive income through dividends and withdrawing funds from retirement accounts.A few initial steps for determining retirement income is:
    • Estimate how much you will receive in social security – According to December 2013 beneficiary data, the average person receives approximately $1,294 per month in Social Security benefits. For a full explanation of Social Security benefits, see my previous post on the topic.
    • Calculate how much you anticipate you will receive in dividend income or plan a target amount and figure out what how much equity it will take to reach that target.
    • Calculate how much will be in your retirement accounts – and how much it breaks down to annually – over the course of retirement.

    The primary goal of retirement is to not outlive your retirement income. The more that you can receive from passive income, the better. With that being said, almost everyone will need to have a plan of how much – and how often – they will withdraw funds out of their retirement accounts.

  • Calculate expenses in retirement. Calculating expenses in retirement goes hand-in-hand with calculating income. Ideally your expenses will be lower than your income, though it’s certainly okay for them to zero out.Calculating expenses in retirement might require sitting down with a professional who specializes in retirement planning. They will have a good idea of what your expected expenses will be when you retire. You can still get a rough estimate by listing out things you know you will spend money on in retirement such as health care, food, home maintenance, clothes, gifts, travel, etc.Once you have an inventory of your current assets, projected income per month (or year), and estimated expenses, you are well on your way to having a solid plan for retirement.
  • Learn about health care options. One thing I can’t stress enough is the importance of planning for health care in retirement. Medicare and Supplemental Medicare insurance unfortunately isn’t as straight-forward as you might think. If you are looking for some good tips and background on signing up for Medicare, I would highly recommend checking out Caroline Mayer’s article on the topic, Turning 65? 9 Tips For Signing Up For Medicare.Keep in mind that even if you have Medicare and Medicare Supplemental health insurance you still may be responsible for some pretty large medical bills. For example, Fidelity estimates that a couple retiring in 2007 at age 65 with no employer-provided health care coverage will need $215,0003 in savings to fund out-of-pocket medical expenses in retirement. This is one reason I recommend everyone who has the option should contribute to a Health Savings Account (HSA), regardless of whether they anticipate medical bills in the short-term.
  • Use a retirement calculator. While there is much more to retirement planning than simply plugging numbers into a retirement calculator, it can at least give you a rough idea of whether you are on track or not.I like the CNN Money retirement calculator because it keeps things simple. While I have already touched on a number of things that go above and beyond this calculator, I still think there is some value in seeing whether you are on track or not by plugging in your current age, income, savings rate, and target retirement date.This is particularly useful if you are a ways away from retirement and don’t have a good idea of the specifics (i.e. assets, expenses, etc.) that you will have in retirement.
  • Adjust savings as needed. Once you’ve gone through all the previous steps you probably have a good idea of whether you are on-track for retirement or not. If you aren’t on track or want to increase the amount of disposable income you have in retirement, consider increasing your retirement contribution amount. If you are age 50 or older you are able to take advantage of the IRS Retirement Catch-Up regulations.Increasing the amount you contribute to retirement may require sacrifice in the short-term, such as cutting back on how much you help your children out with their college tuition or how often you go on vacation, but retirement should be one of your top priorities.

Use this retirement checklist as a starting point and guide for the retirement planning process. Do not be afraid to consult a licensed financial adviser who has expertise in retirement planning, as preparing for retirement can be overwhelming.

David Carlson works in finance and is a personal finance blogger at Young Adult Money.  You can find him on twitter @YoungAdultMoney or @DavidCarlson1.