5 Things You Need to Know Before You Retire
Take it from a professor who has spent the last 10 years focusing on the distribution phase of retirement, here are some lessons to live by.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

As a professor at The American College of Financial Services and the co-creator of the Retirement Income Certified Professional (RICP®) program, I’m often making lists of what I think everyone needs to know about planning for retirement. And, on a personal level, as someone who is approaching retirement myself, those lessons are really hitting home.
So, here is my current list of what I’d like to shout from the mountaintops — the five things you must know before you retire.
1. Knowledge Is Gold
Making smarter retirement decisions means more retirement security. Research from Morningstar found that informed (versus naïve) decisions in just six different areas of retirement planning can increase retirement income by 31% — and there are a lot more than six planning areas. Think about what that means: If you invest time to learn your options, you can improve retirement security. That’s powerful. You don’t have to win the lottery or hope that Aunt Sally remembers you in her will — just learn about Social Security claiming, choosing the right Medicare option, or the role of guaranteed lifetime income.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you want something to get you started, watch these Retirement Income 101 (opens in new tab) videos, or take the Retirement Income Literacy Quiz (opens in new tab). If you’re inclined to seek advice, find an adviser who really understands the issues faced at this time of life, like an adviser who has earned the Retirement Income Certified Professional (RICP®) (opens in new tab) designation.
2. Look Before You Leap
Warning: Haste makes waste. So, don’t give up a long-term job before you know what’s next and that you can afford it. This may sound obvious, but a 2018 Bankrate study (opens in new tab) indicated that 58% of baby boomers claimed ignorance of how much money they needed for retirement. There are many reasons to look before you leap, but here are two. First, giving up a career often means giving up valuable additional retirement benefits, especially health insurance.
Second, if you decide that you miss work or miscalculated how much money you needed to retire (or never calculated it in the first place) finding a comparable job with the same wages at an older age is hard.
3. Levers of success
Pre-retirees looking to improve their retirement plans should understand that there are three main levers that have the most impact on retirement security: retirement age, Social Security claiming age and spending levels in retirement.
- Retirement age. A study from the Stanford Longevity Center (opens in new tab) found that three months of additional work generates the same increase in retirement income as saving an additional one percentage point of earnings for 30 years. That fact screams “keep working!” Avoid burnout by taking vacations, change your attitude, avoid your boss or choose a role with less income and less stress — but keep working if you can.
- Social Security claiming age. If you’re not living under a rock, you’ve heard the advice that deferring Social Security will improve your retirement security. Believe it. About two-thirds of retirees get more than half their retirement income from Social Security. If you’re in this group, your Social Security claiming decision is the most important retirement decision that you will make. For example, an individual with a full retirement age of 66 will receive 76% more by claiming at age 70 instead of age 62.
- Spending levels matter. Reduce retirement spending and your resources will last longer. If you do this right you may not have to destroy the lifestyle that you’ve become accustomed to. Some options to consider: Stop buying the stuff that doesn’t really mean much to you; become a thriftier shopper (read all those lists (opens in new tab) of ways to save money in retirement); and/or move somewhere where the cost of living is lower. (See 27 Cheapest Places Where You’ll Really Want to Retire.)
4. Living on your own dime is nerve-racking
Living primarily on withdrawals from your retirement portfolio is not for the fainthearted. Today, many individuals go into retirement with Social Security benefits, a significant account balance in their 401(k) plan, and a few bucks in the bank. It’s unlikely that Social Security will cover living expenses (especially for those who claim Social Security at 62) so this means figuring out how to generate additional income from 401(k) plan withdrawals. How much you can afford to take out each year depends upon a lot of moving parts, including how the portfolio is invested, how volatile investment returns are, how long retirement will last, and whether you are willing to cut back on withdrawals if the market is down.
Given what I know, I’m not willing to have most of my retirement income coming from withdrawals from a volatile portfolio — because I want to sleep at night. Pre-retirees should think about ways that they can increase the types of regular income that will last a lifetime, regardless of how long they live. The first place to look to accomplish this is to defer Social Security to age 70 to increase the stream of monthly income. Another is to choose an annuity form of payment from a company retirement plan, or purchase a commercial annuity.
5. Answer the ‘what ifs’
So far we’ve been talking about the easy stuff, but the hardest part of planning for retirement is preparing for the “what ifs,” like what if you live much longer than expected? What if you or your spouse has a serious health care issue? And what if the stock market tanks in the first five years of retirement? Here’s a helpful chart (opens in new tab) that we use in the RICP® program that addresses solutions to the 18 risks that need to be addressed while retirement planning. Your plan isn’t complete until you’ve addressed these issues.
There are many twists and turns in the retirement road map, and I’m looking forward to sharing the knowledge I’ve learned over my career teaching financial advisers how to help their clients better prepare for their retirement years.
Dave Littell is the co-creator of the Retirement Income Certified Professional® (RICP®) program and a Professor of Taxation at The American College of Financial Services. He focuses on retirement income process, strategies and solutions to increase retirement security for consumers, business owners and their advisers through digestible retirement education.
-
-
A Retirement Income Distribution Plan Is as Critical as Saving
Designing a strategy to efficiently use your retirement savings is a critical step on your retirement planning journey to maximize your income and ensure a long-lasting retirement.
By Bradley Rosen • Published
-
The Markets Were Miserable Last Year, But That’s Great News
It’s all about perspective. Hopefully, you learned that your financial plan can withstand market downturns. If not, now you know you need to make adjustments.
By Andrew Rosen, CFP®, CEP • Published
-
A Retirement Income Distribution Plan Is as Critical as Saving
Designing a strategy to efficiently use your retirement savings is a critical step on your retirement planning journey to maximize your income and ensure a long-lasting retirement.
By Bradley Rosen • Published
-
The Markets Were Miserable Last Year, But That’s Great News
It’s all about perspective. Hopefully, you learned that your financial plan can withstand market downturns. If not, now you know you need to make adjustments.
By Andrew Rosen, CFP®, CEP • Published
-
Five Ways to Diversify Your Portfolio During a Recession
Investing successfully during a recession is tough. However, you can protect and grow your portfolio with various diversification strategies.
By Justin Grossbard • Published
-
Curious About a QLAC? SECURE 2.0 Act Gives This Annuity a Boost
New legislation raises the amount you can transfer from your rollover IRA to a qualifying longevity annuity contract (QLAC), reducing RMDs and increasing guaranteed lifetime income.
By Jerry Golden, Investment Adviser Representative • Published
-
Need an Estate Planning Checkup? Now Is the Perfect Time
An appointment with your estate planning attorney can address any holes that have developed and ensure everything is in place.
By Jack R. Hales Jr., J.D. • Published
-
How to Create Retirement Income That’s Driven by Cash Flow
Using a combination of dividends and structured notes in your retirement portfolio can offer liquidity, income and risk mitigation.
By Kyle Hammerschmidt, Investment Adviser • Published
-
Gaining More Certainty in Your Retirement Income Plan
Relying on market performance to close the gap in your retirement income could let you down, but a CD ladder and fixed annuities could provide some certainty.
By Cole Czajkoski, Investment Adviser Representative • Published
-
Considering a 1031 Exchange? The Rules You Need to Know
Taxes are an inevitable part of investing in real estate. You can, however, defer or avoid paying capital gains taxes by following some simple rules of a 1031 exchange. Yes, you read that correctly!
By Daniel Goodwin • Published