Retirement Checklist: 6 Steps to Take Before Retiring

Here’s a quick checklist for retirement planning. First, estimate your retirement expenses and income. Then, calculate your savings, assets, and income sources. Pay off debt, estimate your healthcare needs, and then consider part-time jobs to cover any income gaps. Finally, consider seeking professional financial advice.

Retirement is one of life’s last big transitions.

It’s exciting because it offers you freedom — you can spend your time however you want. But the prospect of retirement may also be scary. Without work, how will you pay for your daily expenses and support your lifestyle?

The trick to thriving in retirement is to plan for it adequately, and that means thinking ahead about what your expenses will be and how you’ll cover them.

In this article, we cover the top six steps to take before you retire to ensure that you’re well set up and feeling confident as you move into retirement.

Step 1: Determine Your Retirement Income Needs

The first step to building any strategy is to consider your goals. In the case of retirement financial planning, this means thinking about what your financial needs will be. Understanding how much money you have will help you understand the products you might need. It also helps you evaluate your retirement savings trajectory to determine whether you’re on track.

Here are some factors to consider:

• Living expenses. Estimating your living expenses is critical. Think about what your monthly expenses will be given the lifestyle you’d like to live. Consider bigger expenses, like travel, too. Knowing what your expenses are can help you calculate how much retirement income you need — or how quickly you’ll eat through your nest egg.
• Inflation and cost of living increases. After calculating your living expenses, consider inflation — the tendency of the cost of goods to rise over time. As goods become more expensive, your money goes less far. We can’t know the value of money in the future, but you can use an inflation calculator to estimate the value of your savings in the future when you retire.
• Social security. Most American workers over 65 are eligible for social security retirement benefits. Social security is an important source of retirement income for many people. It’s not enough for many people to live on, but it can help to offset your expenses. You can estimate your benefit from the Social Security Administration website.
• Pensions. Depending on your work, you might also receive pension income after you retire. Pensions typically provide a monthly benefit to you and potentially even a spouse. Again, your pension payments may not fully cover your retirement budget, but they can help reduce the gap between your income and expenses.

Together, the above foundational pieces let you build a rough retirement budget. They can help you understand how much money you’ll need each month and how much you can rely on to come in each month.

With that in mind, the next step is thinking about how much retirement savings and other assets you’ll need to cover any gaps in your budget.

Step 2: Review Your Retirement Savings and Assets

Saving for retirement is critical. Ideally, you’ll put away a portion of your paychecks each month to go toward retirement. Many financial advisors recommend that you stash away between 10% and 20% of your take-home pay, starting in your 20s.

Not sure how much to save? Here are some standard retirement goals by age group.

Just as important as your savings is how you use them. If you can generate a return on your retirement savings, you’ll be in a much better place financially when you’re ready to stop working.

So rather than thinking only about your savings, think about your entire portfolio of assets. Typically, your portfolio will be diversified in terms of risk, meaning that it will be made up of a mix of safer assets and riskier assets.

• Cash. It’s a good idea to hold some of your money as cash in an emergency fund. This may not generate much income for you, but it can be handy if you run into trouble and need to access your funds quickly.
• Certificates of Deposit (CDs). CDs are another very safe investment option. They typically generate slightly more returns than savings accounts, but they also lock up your money for a period of time. Some people like to have CDs to fill out the less risky part of their portfolio.
• Bonds. Bonds are another investment option for the safer end of your portfolio. Like CDs, they typically provide limited returns, although they usually beat savings accounts. Note that while many bonds are considered safe, some are riskier than others.
• Annuities. Annuities are insurance products that can help you increase your money over the long term. Even very low-risk annuities, like fixed annuities, offer quite good interest rates, so your money grows steadily. Annuities are unique in that they are the only financial product that offers a guaranteed income in retirement. That’s why they’re a popular choice for a retirement portfolio.
• Stocks. Stocks and other securities, like index funds and mutual funds, can help you fill out the more risky part of your portfolio. These have a higher potential to grow your wealth, but in a bad market, you could lose your money, too. Some stocks, like dividend stocks, may help you secure a steady income.

In this step, review and evaluate your current portfolio, retirement accounts, and financial products. Are you on track to meet your goals? Are they appropriate for your risk tolerance profile? Are there any gaps?

For example, you may notice that you have a good range of riskier investments like stocks, but you may be lacking a way to create a steady stream of retirement income. In that case, you may consider buying an annuity so you have the option of turning your savings into regular monthly payments.

By the end of this step, you should have a good idea of the strengths of your current retirement portfolio and ideas for opportunities to make it more well-rounded going into the future.

Step 3: Create a Plan to Pay Off Debts

Next, think about your debt.

Debt represents a risk to retirement because it can be expensive. For example, the interest you pay on credit card debt can be 20% or even higher. If you’re paying 20% on your debt, it may be difficult for you to save effectively for retirement. By paying off your debt, you can empower yourself to save more.

So, consider prioritizing debt repayment. Do that by creating a debt repayment plan. Prioritize your highest-interest debt and work to make regular monthly payments. Curtail your spending to pay it off even faster.

Once you’ve paid your debt off, you’ll be in a better position to contribute effectively to your retirement savings.

Step 4: Estimate Your Healthcare Needs

Another incredibly important consideration is your health.

Healthcare is one of the biggest expenses for retirees. A recent study reported by US News found that a 65-year-old couple who retired in 2020 would have healthcare expenses that averaged $295,000 over their lifetime. Those costs come from Medicare premiums, copays, deductibles, insurance coverage fees, and other out-of-pocket costs for things Medicare doesn’t cover.

Of course, we can’t know what our health will be like in the future, but we can still prepare for it. Here are some actions you can take to make sure you’re ready for healthcare costs in retirement.

• Understand medicare benefits and costs. Medicare is available to individuals who are 65 and older. It’s made up of four different programs: hospital insurance, medicare insurance, medicare advantage plans, and drug coverage. Each part has different coverage, benefits, and premiums. Understand how those apply to you and what they could cost you.
• Insurance. Many retirees buy supplemental insurance in retirement to ensure that any medical expenses they will have are covered. These can include extended health insurance, basic life insurance, and even long-term care insurance policies. Think about what coverage you might like and what it could cost.
• Health savings. You might want to set aside a certain amount of your savings to save up for potential healthcare costs. For example, you could open a health savings account to set aside pre-tax income to use for qualified medical expenses.

Note that some financial products allow you to withdraw money for health expenses. For example, Canvas Annuity’s products permit you to withdraw money from your annuity early without paying a surrender charge if it is for some qualified medical expenses (talk to Canvas’ licensed reps for more details on withdrawal options and rules).

Step 5: Consider Whether You Will Work Part-Time in Retirement

After thinking about all the financial obligations you’ll have together with your sources of income, consider how you’ll fill in any gaps.

Some retirees ultimately end up working part-time. This can help provide an income to make up for a late start in retirement savings. It can also have a social benefit — if you like your work and your colleagues, working can provide a source of satisfaction and fulfilling social relationships as you age.

Just note that working part-time can impact your social security benefits — learn more here.

Step 6: Seek Professional Advice

As a last step, consider seeking advice from a financial adviser to help you build a robust retirement plan that’s tailored to your individual goals and financial circumstances.

Financial planners can help you understand various options for investing and financial products and think about how to set yourself up for regular monthly income payments. Creating your plan with a certified professional may help you feel more confident and secure about preparing for retirement.

The Earlier You Start, the Better

There’s an old proverb that applies to retirement planning: The best time to plant a tree is 20 years ago. The second best time to plant a tree is today.

Retirement planning is similar. The earlier you start, the better. And if you didn’t start 20 years ago, then consider starting today.

The above checklist can help you know where to start. It gives you a roadmap for building your retirement savings so that you can live your best life in retirement.

If you’re looking for the product that gives you the most bang for your retirement savings buck, consider annuities. Fixed deferred annuities give you three powerful benefits:

• They safely grow your retirement savings at a steady, guaranteed interest-crediting rate
• They offer tax-deferred growth
• When you’re ready, you can convert them into a steady stream of monthly annuity payments for the rest of your life

Read more about the benefits of annuities here.

If you’re ready to apply, you can buy an annuity online today.