Making Your Money Last

A Pre-Retirement Checklist: 8 Steps to Take Right Now

Planning for retirement obviously is a big job, so it helps to break it down into a series of goals that you can check off as you go.

Retirement should be like a second childhood … without parental supervision. I believe that’s doable for most people, but it takes planning.

Luckily, you can begin right now by taking these steps:

No. 1: Decide where you want to live.

Think about the retirement lifestyle you desire, and find a location that supports it. If you want to travel, you may opt to downsize to a condo. If you want peace and quiet, a small town could be the ticket. If you want to have more money at your disposal, you might want to move somewhere with lower taxes and a lower cost of living.

No. 2: Practice retirement now.

After you retire, you no longer have somewhere to go every day. You’re cut off from your typical social network. It can be a surprisingly difficult time. Try to avoid post-retirement depression by contemplating what you want to do and beginning it now.

Would you like to volunteer for your church? Start now. Interested in teaching for a university? See if you can teach a class now. By practicing your retirement, you can find out what you really want to do (it may not be what you think), and meet new people, too.

No. 3: Retire your debt.

I believe that when you are retired, so should your debt be retired. If you have no mortgage, no car payment and no credit card debt, most of your expenses will be variable costs you can control. Wouldn’t that feel great? Want to begin now? Make a list of all your debts, then rank them by highest interest to lowest. Depending upon the terms and conditions of the loans, it usually makes sense to start paying off the highest interest debt first and work your way down until you have paid off all your debt.

No. 4: Reconsider your risk profile.

Once you’re five years away from retirement, I believe you need to adopt a defensive investment philosophy. You may have invested more aggressively while you were growing your money. However, now would be the time to diversify and reduce your risk to help avoid losing a big chunk of your retirement to a bear market. We recommend and often employ several defensive strategies with our Money Matters clients, such as rebalancing their portfolios quarterly; reducing their exposure to equities; and creating stop-loss strategies to mitigate downside risk.

No. 5: Think about health care.

It's an unfortunate fact of life: Health care becomes more critical (and potentially expensive) as we age. Don’t forget to include it in your plans, especially if you want to move or travel extensively. For example: Medicare may not pay for expenses incurred outside of the United States, so you might consider buying a private insurance policy to fill that gap.

No. 6: Make a budget.

How much money will you need to support the lifestyle you want? I suggest you come up with two numbers. The first is the amount you need to cover the things you need, like food, housing and health care. To get your second number, add the costs of the things you want — like travel or a club membership. Create a financial plan that gives you a high probability of achieving the necessities, and then add the luxuries if possible.

No. 7: Apply for Social Security ahead of time.

If you’re waiting until your full retirement age to collect Social Security, it’s recommended that you apply at least three months before you want your benefits to start (you may apply as early as four months before your full retirement date). Make sure you have all the documentation needed. You can find a list of required documents here.

No. 8: Consider rolling over your 401(k).

After years of pumping money into their 401(k)s, workers approaching retirement have some decisions to make. Transferring money out of a 401(k) to an IRA could increase investment options, allow for more flexible estate planning and offer more distribution options.

When making any decision about moving your money, make sure to take into consideration your age, current financial status and costs involved. It may not be the right time for you to roll over your 401(k), but it is the right time for you to study your options.

About the Author

Ken Moraif, CFP®

CEO and Senior Adviser, Retirement Planners of America

Ken Moraif, CFP, is CEO and senior adviser at Retirement Planners of America, a Dallas-based wealth management and investment firm with over $4.3 billion in AUM and serving over 8,000 households (as of May 2019). He is also the host of the radio show "Money Matters with Ken Moraif," which has offered listeners retirement, investing and personal finance advice since 1996.

Most Popular

Top Bear Market Tips from 10 Financial Advisers
investing

Top Bear Market Tips from 10 Financial Advisers

When a bull market turns into a bear market, it can be hard to know what to do. Take comfort in the guidance of 10 financial professionals.
June 30, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 15 Best Stocks for the Rest of 2022
stocks to buy

The 15 Best Stocks for the Rest of 2022

The lesson of the past two years: Be ready for anything. Our 15 best stocks to buy for the rest of 2022 reflect several possible outcomes for the seco…
June 21, 2022

Recommended

How 13 Types of Retirement Income Get Taxed
retirement

How 13 Types of Retirement Income Get Taxed

When you're planning for retirement, it's fun to contemplate all the travel and rounds of golf ahead of you, but don't forget about taxes.
June 30, 2022
Financial Advice from America’s Founding Fathers
credit & debt

Financial Advice from America’s Founding Fathers

What money-management guidance can we glean from the words — and experience — of Benjamin Franklin, Thomas Jefferson, Alexander Hamilton and others?
June 30, 2022
In What Order Should You Tap Your Retirement Funds?
retirement planning

In What Order Should You Tap Your Retirement Funds?

Should you go with your IRA first or your brokerage account? Pulling money haphazardly can have negative implications. Instead follow this road map fo…
June 28, 2022
An Easy Way to Find How Much You Will Spend in Retirement
retirement planning

An Easy Way to Find How Much You Will Spend in Retirement

One simple math equation can help you determine where to start building your retirement income plan, and whether your money should last.
June 27, 2022