I get questions regularly on what are the steps someone needs to take once they decide to retire and how long should they plan to complete them. I figured I would share some thoughts based on my experience over the last decade or so. These are all steps you must be involved with. However, if you have a good financial planner you shouldn’t be going through them alone.
- Plan to spend a year prepping for retirement. I get not everyone has this ability due to job elimination, health issues, or family emergencies. However, to do it right without feeling rushed expect a year to get everything in order. Some of these items include:
- Get with your human resources department. Hopefully your employer has a proactive HR department that will guide you through how to exit your position and head into retirement. Topics to cover are: health insurance options available through them in retirement; can you carry over your life insurance; how much notice must you provide; payouts on any unused benefits such as sick or vacation days; and more. Have the attitude of helping make your departure as smooth as possible because you are an important part of the organization.
- Talk to a few friends who have recently retired, from work and outside, on any hot tips. No reason to reinvent the wheel and best to take the advice of people who have recently gone through what you will soon be experiencing. Some of my best tips for other clients come from existing ones.
- Visit your local Social Security office. First, either get the most recent statement Social Security sent to you or access your account online. You will want to verify your statement is correct, especially when it comes to your earnings records. Talk to them about your options to start drawing your Social Security. I wouldn’t recommend starting to draw it immediately, however, get the information so you can make a fully informed decision.
- Gather up the most recent statements for your various investment accounts, including your 401k, Roths, IRAs, and taxable accounts. Sometimes you may have to wait for a quarterly statement to appear (part of the reason this process takes a year) in your mailbox.
- I saved this toward the end, however, it is the most important step. Gather up your bank statements. As I have said before, the most important approach to figure out whether you have enough money saved for retirement is knowing as clearly as possible how much money you will need to spend in retirement. The bank statements will help clarify your spending picture. Be aware some spending changes will not be reflected on your bank statements, such as you will no longer be contributing to your 401k plan or spending as much at the dry cleaner. However, other costs will replace them, such as higher health insurance expenditures now that you aren’t covered by your work plan. This number will change in retirement, but the best way to estimate is getting clarity on what you have spent the last year.
- Take a look at your insurance expenses I doubt you will need disability insurance in retirement. It might be worth talking to your car insurance agent in case your commute goes from 70 miles a day to zero.
- Double check your estate planning documents, including any powers of attorney you have in place (or should have). Do this before you retire in case your employer offers access to an attorney at a reduced price.
- Another thing to consider is to do any big planned medical events before you lose your work health insurance. Like a physical, dental work, or just using up the balance of your flex spending account.
- Finally, talk to your CPA to see if there is any tax planning you need to do ahead of time. Maybe you make your retirement day after the first of the next year if your employer is going to give you a lump sum payout on unused time off.
This is a rough list of a few things you need to consider as you get closer to retirement. Again, nothing here you cannot do on your own independent of a financial planner. However, if you are relying on your financial planner to help you with this it is important to make sure they are experienced in working with people transitioning to retirement. There are no do-overs in retirement.