Retirement planning is a comprehensive process, and it is critical to prepare proactively to secure your financial future. Here’s an overview of seven important steps to help you navigate that phase of life for which you’ve worked so hard to enjoy.
1. Get organized.
Empty the financial junk drawer. During your working years, you may have collected several investment accounts. Make an organized list to see if it’s beneficial to still own each of those accounts or if things could be simplified by combining them.
Also, complete a budget, and build that budget with retirement in mind. For example, if your commute is decreasing, you might be spending less on gas. But if you like taking weekend trips, your gas costs might actually go higher.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
Make sure you have fun stuff on your bucket list, like foreign travel, which is often best done in the early years of retirement when you still have the health to do so. Use some retirement planning tools to take a look forward. Review what your expenses vs your assets might look like and account for things like inflation.
2. Factor in tax planning considerations.
Have a general understanding of taxes in retirement, such as how different things like your pension, retirement accounts, investments and Social Security are taxed in retirement so you don’t have unwelcome surprises.
Use tax-efficient withdrawal strategies. Make sure you’re pulling appropriate amounts from each account to minimize your overall tax vulnerability. Also, factor in state tax considerations; some states are more tax-friendly for retiring, so if you choose to relocate in retirement, be aware of that state’s tax percentages and build them into your cost structure.
3. Understand Medicare filing and choices.
It’s important to know your enrollment timeline. Have a general understanding of Medicare Parts A, B, C and D, what each cover and their costs. Look at supplemental policies, such as Medigap or Medicare Advantage plans, to help provide additional coverage in retirement.
4. Consider Social Security filing and optimization.
Determine the best age to start claiming benefits. The age at which you start receiving Social Security will impact the amount of your monthly benefits. The longer you defer, the higher the payments are.
Be aware of spousal benefits and strategies you might take. If one spouse stayed at home while the other worked and earned more, they might be able to claim a spousal benefit even if they didn’t work enough on their own to qualify for Social Security.
Also, learn the impact of working in retirement with your Social Security benefits. If you plan on working a part-time job or doing some consulting, make sure you’re aware of how your Social Security will be taxed and any penalties you might have in association with that.
5. Think through investment planning.
Think through your asset allocation, adjusting your investment portfolio to balance growth and risk as you approach and enter retirement. The goal is to have enough safe assets to withdraw from to satisfy your income needs for anywhere from a six- to 10-year period. That way, any market corrections would not derail your retirement plan.
You also want to factor in required minimum distributions (RMDs) from retirement accounts and when and how they might impact your asset allocation. Also, make sure your investment strategy accounts for inflation so that 20 years from now you still have the same purchasing power that you have today.
6. Look at legacy planning.
There’s a lot to consider in estate planning — wills, trusts, beneficiary designations, etc. — in order to ensure that your assets are distributed according to your wishes.
Also be aware of the tax implications for your beneficiaries, understanding how your estate will be taxed and how to minimize this burden for them. Also, consider your charitable giving and the goals you have within your estate.
7. Make purpose-driven decisions.
It’s important that you take the time to redefine your identity close to retirement — exploring new hobbies, volunteering, opportunities for part-time work or other activities that help bring fulfillment to your life. The worst type of retirement is when you just sit on the couch and watch the news all day. Set personal goals and lifestyle goals to maintain a sense of purpose and direction, and prioritize your health and wellness to make sure you enjoy retirement to the fullest.
Effective retirement planning is a multifaceted process that balances financial security with personal fulfillment, with careful consideration of tax implications, health care needs, income strategies and personal goals. Consulting with financial advisers, tax professionals and health care consultants can provide valuable guidance tailored to your individual circumstances.
Dan Dunkin contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Related Content
- Five Things I Wish I’d Known Before I Retired
- Retirees’ Anti-Bucket List: 10 Experiences You Don’t Want
- Do You Have at Least $1 Million in Tax-Deferred Investments?
- The Four Headwinds of Retirement and How to Combat Them
- Nervously Nearing Retirement? Four Do’s, Four Don’ts and One Never
-
Dow Hits New Intraday High on Fed Day: Stock Market TodayNot even the most important stock in the world could keep the oldest equity index down on a significant day for markets.
-
Savings Goal CalculatorTools Want to know how much you need to save each month to reach your financial goals? Our calculator helps you build a realistic savings plan.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to KnowIf you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both WorldsBefore investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client ReviewsFinancial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop InvestmentsTruck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
