11 Steps to Take Before You Retire

Retirement is a major event after many years of work. It marks the time when you end your career and begin the next chapter of your life.

But sometimes retirees discover that they haven’t prepared as much as they could have for this transition. Just on the financial side, there are many pieces to set in place.

Those focal points range from ensuring you have enough retirement income to knowing what your post-career goals are and being ready for unexpected financial challenges.

You have worked hard to reach this point. Now it’s your turn to make the most of this point and enjoy the things that you may have delayed or put off during your working years.

Here are 11 steps that you can take to help ensure that you are ready for the big day when it finally comes. You can use these steps as a starting guideline for putting your retirement planning in order and being ready to enjoy your post-career lifestyle.

1. Talk About Your Goals with Your Spouse or Partner

While they have spent years together, sometimes couples can be surprised at how and what their significant other envisions for retirement. At times, their visions might be conflicting, albeit unintentionally.

Does your spouse or partner plan to retire sooner than you do? Later than you? What are their working plans in post-retirement?

This could be one of the most important steps to make before you depart the workplace. Set your goals and get on the same page with your spouse or partner. You want a working game-plan that meets both of your goals and has agreement on core milestones that matter to you both.

A big part of this process is finding agreement on major financial issues such as saving and spending habits, where you are going to live, and when exactly you are going to stop working.

If those conversations are difficult to begin, your financial advisor can be an effective mediator and guide in helping you navigate these important discussions together.

2. Take a Health Status Check

Depending on what your health is now and in future years, your goals may change or be moved around to an earlier timeline. It’s prudent to evaluate your health now – and project what it might be in the future.  

An effective starting point is to try to estimate your longevity along with the state of your health in your future years. If you have current health problems, talk with your doctor about the possible future ramifications that this may have.

There are also the financial implications of this to consider, as well. For example, you might wonder about how you can put insurance to work for you so you can manage costly health expenses as they may arise.

If you are looking to buy some life insurance, shop around now to see if there are any insurers that specialize in offering policies to those with the same health conditions as you. If your family has a history of good health and longevity, then some form of long-term care may be required at some point.

Starting to plan for this now can help you get ahead for having contingencies for this situation and other changing health scenarios.

3. Calculate Your Monthly Income Needs

One major step to take is related to your income needs for retirement. Using your current spending habits and monthly cash-flow as clue-ins, you can estimate the amount of money that you will probably spend each month in retirement.

One common misnomer in retirement planning is that you will spend less in retirement than you do now. But this isn’t always the case.

The reality is that you may have to spend even more during retirement than you do now due to higher medical bills or long-term care expenses. You are almost certain to have to spend more on healthcare than you do now.

Other amenities such as an assisted-living community can also come at a hefty price.

4. Determine Your Working Plans

Decide how much you want to work in retirement and what that might look like. Nowadays, people are constantly redefining what retirement means. They are pursuing second-act careers, entrepreneurship, or heavy involvement with charities or social causes that matter to them.

You might have plans of this sort in store. It’s good to revisit what those goals are, and what such goals your partner may have, so you have a vision of how you might spend your newly freed-up time.

These goals can be small or large in scale, depending on what you enjoy. Say you have a hobby such as model trains. In that case, you might consider working part-time at a local hobby store.

Even a part-time job can go some ways towards covering monthly living expenses and allowing retirement savings dollars to stretch further. After all, that means that you have to dip into your retirement accounts less for income (and deal with the effects of that, not to mention the tax bill).

5. See if You Have Any Income Gaps

A rock-solid retirement income plan will go further than just estimates for monthly income needs. It will also account for the broader picture of how much money you might need for the “nice-to-haves” or “nice-to-do” activities in retirement that you have long waited for.

What might those be? Traveling to foreign countries. Making a cross-country tour in an RV. Buying a nice boat and enjoying water activities. The opportunities are truly endless.

Your financial professional can help you figure these expenses into your overall retirement budget and plan. Then it’s matter of matching all of your estimated expenses with the income streams you expect to be receiving in retirement.

Calculate the amount of money that you will need to spend in retirement each year, looking for any gaps between what you might spend and how much income you are bringing in.

In most cases, you will be wise to seek professional help with this step. A financial professional can analyze your projected spending numbers. They might even be able to run reports that can break down how far your retirement income will go towards your projected expenses.

Your income planning can also help you to determine when to start taking Social Security and how much longer you might need to work in order to retire comfortably.

6. Plan for Taxes Now and What They Might Be

Taxes can be one of the biggest expenses in retirement, especially if your household income is high. It’s prudent to be mindful of your tax situation as you plan for retirement.

Taxes might well go up in the future, due to growing government debt loads from the coronavirus economic relief efforts and government spending from prior fiscal years.

All of your traditional retirement plan distributions from IRAs and employer-sponsored qualified plans are taxed as ordinary income. That means that they will be taxed at your top marginal tax rate.

If you work another job during retirement, then you will have payroll taxes for that income as well. Talk to your financial professional to see what you can do to reduce your tax bill.

Say you have a year coming up where your taxable income will be lower than usual. Then that could be a good time to convert one or more of your traditional IRAs or qualified plans to a Roth account.

7. Make Informed Choices About Social Security

Educate yourself about your Social Security benefits and claim them at the optimal time in order to maximize your income. If they are truly knowledgeable about Social Security benefits and their ins-and-outs, your financial professional can help you walk through different claiming strategies and timing.

Your full retirement age, as determined by the Social Security Administration, will have a big role in what your benefits are. If you claim your Social Security benefit before you have reached full retirement age, yes, you will start receiving payouts from the SSA sooner.

But the trade-off is your benefits will be permanently lowered from what they could have been at full retirement age or beyond. Then, if you wait past full retirement age to claim your benefit, your payouts will actually be higher. Each year that you delay taking your benefit past full retirement age, the more your benefit accrues.

The latest age that you can wait to claim Social Security is age 70. So, there is no benefit to waiting past that point. And, of course, waiting to take Social Security at full retirement age or beyond isn’t necessarily the right strategy for everyone, either.

The best timing and claiming strategy for you will depend on your personal situation and health status. Your financial professional can help you weigh your options accordingly.

Be sure to weave these numbers into the rest of your financial plan. That way you know how your various streams of income may affect each other.

8. Explore How to Stay Socially Connected

While retirement planning is somewhat about finances and numbers, retirement itself is much more than that. It’s also important to see how you will stay engaged and socially connected during this phase of life.

This can’t be emphasized enough. Many retirees find themselves struggling with a loss of identity after they stop working. It can be easy to lose touch with former coworkers and professional acquaintances.

You will need to take a proactive approach to making new friends and building up a new social network that will allow you to play a tangible role in your community.

9. Test-Drive Your Lifestyle Plans

Consider test-driving your retirement lifestyle for a few weeks or months before you actually stop working for good.

If you get bored after lying around the house for a few weeks, then you will probably be bored after you retire as well. Different people handle retirement in different ways.

Some people need to stay active in order to avoid depression or loneliness. Others are able to take refuge in their solitude and don’t need as much interaction in order to stay content.

But it’s important that you find out how you will react to retirement before it actually happens. This will give you some “wiggle room” in which you can make contingency plans if necessary.

10. Prepare for the Unexpected

Nothing in life ever goes 100% according to plan. It’s prudent to have a plan at the ready in case the unexpected comes up.

Consider this scenario as an example. You may have your non-working years all planned out with various activities, part-time employment, and volunteer work in the mix. But if you have a stroke a year after you retire, then your plans will most likely have to be changed drastically.

Be aware that things like that can happen and leave some wiggle room in your plans for changes as they come along.

11. Stick with It

Stick with your plan and be prepared to enjoy the fruits of your life’s work. A well-crafted financial plan can help you maximize your retirement savings and get the most out of your non-working years.

Retirement is a well-deserved reward for a lifetime of employment and sacrifices that you have made in order to secure your financial future.

Need Help with Your Retirement Goals?

These are just some of the things that you can do to ensure that your transition into your non-working years goes as smoothly as possible.

By taking these steps now, you can have a strong bulwark against any unpleasant financial surprises. Consult your financial advisor for more information on retirement planning and what you can do to prepare for this next chapter of life.

What if you are looking for a financial professional to help you with your retirement? Or perhaps you have a current plan in place but simply want another opinion of it.

No sweat, help is just a click away at SafeMoney.com. Many independent financial professionals are available to help you.

Use our “Find a Financial Professional” section to connect with someone directly. You can request an initial appointment to discuss your personal goals, concerns, and situation. Should you need a referral, call us at 877.476.9723.