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.
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.
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
-
The Most Tax-Friendly State for Retirement in 2025: Here It IsRetirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Plan for Higher Health Care Costs in 2026: Projected Medicare Part B and Part D PremiumsIn 2026, Medicare participants will pay more for their health care. Part B costs are expected to rise more than 10%. Here's what you can do.
-
Avoid Medicare's 'Shadow Tax' With This Financial Expert's IRMAA-Busting TipsYou're cruising along in retirement, and then bam: Your Medicare premiums soar because your income crossed the limit. Take a breath. There could be a solution.
-
Grilling Season and ETFs: There's More Than One Way to Cook Up a PortfolioExchange-traded funds come in a multitude of 'flavors' these days, from passive to active to factor-based. Their flexibility is what makes them so delicious.
-
You Don't Want It, But You Should Plan for It Anyway: An Expert Guide to Long-Term CarePlanning for long-term care is crucial to protect your independence, family and financial stability against unexpected health events and rising care costs not covered by standard insurance.
-
Five Questions to Help Ensure a Happy, Secure RetirementYou need to drill down to what you really want out of retirement. Then you can get down to the business of crafting a financial plan to make it happen.
-
I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting ByLearning good financial habits — building an emergency fund, paying down debt, saving consistently — gives you flexibility, options and a path to security.
-
How to Buy an Annuity Online (Without Regret)You should never be rushed into buying an annuity. But now that they can be sold quickly and easily online, you need to be more alert than ever to pushy salesmanship. Here are four signs you're working online with a professional.
-
How Much Income Will an Indexed Annuity Get You? An Annuities Expert Lays Out the NumbersGuaranteed lifetime income sounds great, but how much will it be? Several factors determine your future payout on indexed annuities with an income rider.
-
Financial Fact vs Fiction: Why Inflation Is Lower, But Prices Are NotDo you think bonds protect you from stock losses? Are you confident your assets will go to your intended heirs if all you have is a will? Think again — and read on for other myths that could be leading you astray.
