While some people may be retiring in their 50s (or sooner), and others may be preparing for an upcoming retirement, most are planning what steps they need to take in their peak earning years to get them closer to retirement in the next decade. This helpful checklist is meant to invoke conversations with your financial advisor about what the next steps are to get you closer to your retirement.
What Am I Working Toward? – There must be an end goal. However, there are goals that we should aim to accomplish along the way. Here are some key steps:
- Target your ultimate retirement date or goals that must be reached prior to retirement
- Saving as much as you can toward qualified retirement savings, as well as additional non-qualified savings, can help get you one step closer to retirement
- Are you taking advantage of catch-up contributions? These are savings allowed on top of regular contributions for individuals aged 50 or older
- Are you prepared, in the event of a disability, that it may cut you short of your end retirement date?
- Are you taking advantage of any additional opportunities that may play into a final average salary calculation or increase potential pension benefits after retirement?
Where Does My Money Go? Have you analyzed your budget recently? For many people in their peak earning years, the answer is no—but here is why you should take a second look while planning for retirement:
- Do you anticipate spending will go up or down in retirement?
- Will your liabilities be fully paid off, partially paid off, or do you expect new liabilities in retirement?
- Are you paying for education or other expenses related to children, such as wedding expenses? Will this be funded through normal cash flow or retirement assets?
- Are you taking advantage of all opportunities for spending that may allow for a tax break or benefit – such as HSAs and 529 College Savings Plans?
How Am I Currently Invested? Can we maximize our current employer investments? The more time we have to think about it, the more time we have to make changes:
- Do you have all of your savings in a current employer’s savings plan? Do you have any former employer plans that need to be consolidated or revisited for investment options?
- Be sure to revisit your investment allocations, to ensure they align with your risk tolerance and short-and-long-term goals
- If you are retiring after age 55, you may be able to access funds from your employer plan penalty-free prior to age 59 ½
- Have I partnered with anyone in the past, or is now the time to have a financial advisor review my current allocations and future goals?
Are My Family or Loved Ones Covered if Anything Happens to Me? Having sufficient insurance coverage through your 50s is essential. This coverage comes in many forms, and it is important to review which types make the most sense.
- Make sure that your beneficiary designations are up to date and reflect your current wishes, as they supersede Wills and other documents
- Do you have sufficient life insurance coverage? There are various types of coverage – group, term, and whole life, to name a few – and different types are used to accomplish different goals
- Start to think about long-term care coverage. Two of your main options are (1) to self-insure, using your own assets, or (2) purchase an insurance policy while you are healthy and it is more cost effective. These can help greatly reduce costs in the future in the event of a catastrophic health event later on
- Do you have the proper legal documents in place to dictate where your assets will go in the event of your death or incapacity?
It’s Never Too Early or Too Late
Retiring before, during, or later than your 50s will play a big role in how you spend this ten-year timeframe, which typically boils down to accumulating, spending or a combination of both. Since a lot of focus goes into maximizing employer contributions and benefits during your working years, it is important to consider how this will change once you retire. If you decide to retire during this time, you will be looking to bridge a lot of gaps – including health care coverage, income and other valuable benefits. What is meant to be one of the most exciting times of your life can quickly become the most stressful without proper preparation. As a financial advisor, I help clients through this journey, by providing an expert opinion and care through the process – and it is my goal to make sure you only need to retire once!
This checklist is meant to serve a general guide to some important financial and life decisions. At Hefren-Tillotson, we feel it is never to early or too late to be thinking about retirement or about putting your plan in place. To get started on your comprehensive MASTERPLAN®, contact me at 412-633-1524 or at email@example.com. I am dedicated to helping you navigate through this dynamic time.