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10 Things to Do Before You Retire

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Preparing for retirement may seem daunting and overwhelming. You may not know where to start or what information to even consider. This article will discuss 10 things to do before retiring that will hopefully provide some guidance to start on the right track for retirement planning.

1. Know Your Annual Spending Number

From a financial standpoint, what you are spending on an annual basis is the most important thing to know before retirement. There are two ways that you can determine your annual spending number. The best way is tracking your cash flow, either by using an app to keep track of your spending or other another tool. An easier way to determine your annual spending is to annualize your net pay from your paystub. For example, if you make $5,000 net per biweekly pay period, you would multiple $5,000 x 26 pay periods per year, which equals $130,000 annually. There are other factors you need to consider; for example, it is important to account for any other income you receive other than just your salary, as well as any debt. However, as a starting point, using either one of these methods to determine what you spend on an annual basis is extremely important to do before you retire.

2. Social Security (SS)

This is a huge topic for many retirees. The first step we recommend is to create an account at and to download your Social Security (SS) statement. The biggest thing about SS is that it is based on life expectancy. If you are married, it is not just based on your own life expectancy, but also your spouse’s. Keep in mind that, upon the first spouse’s death, the higher of the two spousal benefits will continue to be sent to the surviving spouse. The lower of the two benefits will be discontinued at that time. Be aware that this is a lot more complicated if you were divorced, have been married for more than 10 years, or have a more complex situation; therefore, please consult your advisor about your specific situation.

3. Analyze Your Pension Options

Some people still have a pension option, depending on their job. The two big questions to think about here are, ‘What age should I collect?’ and ‘What survivor benefit option should I choose?’ There are various options, including a one-time lump sum payout or a single life annuity, which only pays out during your lifetime. Additionally, there is the 100% survivor option, in which the monthly amount may be lower, but the benefit will continue to your surviving spouse. This decision needs to be analyzed to determine the best option for each individual situation.

4. Develop an Income Plan from Your Portfolio

You must determine how much you will need to draw from your portfolio in retirement. This all stems from knowing your annual spending number, how much you will receive in SS, pensions, and/or other retirement income. Subtract your SS and pension from your annual spending number, and the remaining amount is the amount you will need to draw from your portfolio on an annual basis. Keep in mind that there are other factors to consider, like inflation.

5. Investment Plan

Another big question retirees have is, ‘How should I have my portfolio invested in retirement?’  Well, the answer to this depends on your own specific situation. You will need to ask yourself, ‘What is my financial need to draw money from my portfolio?’ Your answer to that will determine how aggressive or conservative your portfolio needs to be. Though the financial need from your portfolio is a huge part in determining your investment plan, so is your psychological need and comfort level. If you are in a more aggressive portfolio and there is a downturn in the market, will you be comfortable with seeing your portfolio drop? Thus, you cannot just consider the financial side here; you must also determine what your comfort level with risk is when determining how best to invest your portfolio.

6. Have a Tax Plan

There are different types of accounts, and each one is taxed differently. There are taxable brokerage accounts where you are taxed on dividends, interest, and capital gains. There are Traditional IRAs, where every dollar withdrawn from the account is taxed. There are Roth IRAs, where most of the time, withdrawals are completely tax-free. You must think about what combination of withdrawals from each of those types of accounts you will use in retirement. In addition, you must monitor your income at certain ages because your income can affect other things in retirement, such as Medicare premiums and taxable social security, among other factors. Working with an advisor and/or CPA to help monitor and develop your tax plan in retirement is important.

7. Have a Plan for Health Insurance

While working, most people are enrolled in their employers’ plans. If you retire before age 65, you must determine how you will obtain health insurance for those years, whether it be through the Affordable Care Act (ACA) exchange, enrolling in your spouse’s plan, or another option. If your income is below a certain amount for those years, most people can obtain health insurance through the exchange for a very reasonable cost.  At age 65, most people will enroll in Medicare. At any stage of retiring and/or changing health plans, please consult with your advisor for guidance to see what options are available to you.

8. Think About Long Term Care

At about age 50, we encourage clients to start thinking about what their long-term care plan might look like. Ages 45 to 55 are really the prime time to buy long-term care insurance at a reasonable cost. At age 65, we talk with clients about signing up for Medicare. Between ages 75 to 85, many people begin to need long-term care, whether they move into a continuing care retirement community, decide to age in place at home, hire help to come into our homes, or live with family. It is imperative to start thinking about your long-term care plan and strategy before the need arises.

9. Update Your Estate Plan

Most people who are on the cusp of retirement last looked at their estate plan when they had their children. As they approach retirement, their estate plans are outdated from a personal circumstance standpoint, and estate laws have most likely changed in the intervening years. In addition, estate laws are dependent upon which state you live in. There are three important documents that we recommend you prepare. The first is a Last Will and Testament, which helps you determine where your assets go. The second is a financial power of attorney, in which you name someone to make financial decisions for you if you were to become incapacitated. The third is an Advance Directive, which is a combination of a living will, in which you state what you’d like to have happen to you if you can’t make health care decisions, and a Health Care power of attorney, in which you name someone to make those health care decisions for you. In addition to these three documents, it’s important to make sure your beneficiaries are up to date and your accounts are titled correctly as well. These are the basics for estate planning. Depending on your situation, your estate plan may be a lot more complex.

10. Non-Financial Aspects

There are many important non-financial aspects to think about when retiring. Two that we want to touch on are purpose and health. Many people retire because they feel that they are expected to retire, not necessarily because they are burnt out. Many people enjoyed what they do for work because it gives them purpose, the ability to be social, and/or a sense of identity. A lot of this changes when they stop working. The health aspect is very important as well. You could be financially set up for retirement, but if you aren’t healthy, you won’t be able to enjoy the fruits of your labor. Therefore, prioritizing your health is extremely important. These are just two aspects, but we just wanted to bring these non-financial aspects to your attention as things you should consider before you retire.

While there are more things you should consider when getting ready for retirement, I hope what I covered today gives you a starting point and sparks questions that you can discuss with your advisor.

Financial Consulate aims to help lessen the worry and burden of wealth management and enhance financial wellness so our clients can pursue relationships and true fulfillment. Choose the professionals at Financial Consulate as your Certified Financial Planners™ (CFP®) to take advantage of our educational, ethical approach to financial planning. Our services are comprehensive, including tax planning, investment planning, retirement planning, estate planning, and more. We operate completely independently and offer fee-only services to keep your vision in line with our recommendations at all times. While we have offices in Hunt Valley, Maryland, Fernandina Beach, Florida, and Gettysburg, Pennsylvania, we serve clients across the nation. To begin your partnership with a trustworthy wealth advisor, please contact Financial Consulate today.

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