If you want to enjoy a peaceful and comfortable retirement without constantly worrying about your finances, you shouldn't wait until the last moment or jump in without a plan.
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But sometimes the time for retirement creeps up on us. Many boomers may feel that 2024 is the year they're ready to take the leap.
Andrew Van Alstyne, MBA, a financial planner at Fiduciary Financial Advisors, recommends creating a financial checklist to help you transition toward retirement, calling it He compared it to a “pilot's pre-flight checklist” and added: This is done even before entering the runway for takeoff. ”
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Cash flow evaluation
Van Alstyne said you should start by assessing your cash flow needs.
“The traditional rule of thumb that spending goes down after retirement has been proven wrong in recent years. Unless spending increases due to inflation or lifestyle changes, spending is likely to remain the same. is high.”
It's important to make sure you're considering and planning for it correctly, he said.
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Payments from pensions and social security
He says if you're receiving a pension, try to balance your payment options with people who have other sources of income as they become increasingly spaced apart.
“We need to coordinate our strategies between pensions, Social Security and other income sources to ensure we consider where our income is coming from,” he said.
If you're married and both of you may be claiming Social Security, you may need to make adjustments, especially if you both don't retire at the same time.
“Are you both going to file a joint claim? Are you going to keep the maximum amount of Social Security?” he asked.
Consider medical costs
If you retire before age 65, the age at which you qualify for Medicare, you should make sure to keep track of your medical costs, especially if you have a health history that may require larger or more frequent medical expenses, he said. said.
People retiring before age 65 may need to buy their own health insurance, but some may be able to use employer benefits after retirement, Van Alstyne said. .
However, if the distributions you receive in the first few years of retirement are low, you may also receive a tax deduction in the insurance market, he said.
“If you are contributing or have the ability to contribute to an HSA (Health Savings Account), make sure you fully understand what deductions are allowed under current tax law. When should you take advantage of them? Please reconcile that with your spending as to whether you have one,” Van Arisne said.
“It could be used for long-term care costs, such as recovering from medical procedures,” he said.
Consider long-term care insurance
Van Allison said one in four retirees will likely end up in a long-term care facility after retirement. It's not necessarily a nursing home, but a facility where you may need to stay for long-term recovery after a medical procedure.
He said this could be “devastating” to a retirement strategy if not planned for.
“Long-term care options can help offset these costs.”
Don't forget spousal allowance
Additionally, even if you're divorced, you may be able to receive spousal benefits from your ex-spouse if your marriage lasted at least 10 years, Van Alstyne said.
“This also applies if your marriage lasted more than nine months and your spouse dies, so be sure to take that into consideration.”
Check insurance
Another important area to consider before retiring is any life insurance policies that are still in force, Van Alstyne said.
“Basically speaking, if you covered debt or replaced a source of income early in life, some of those debts no longer exist, and that source of income is now in your plan. It’s moving to where it’s already going.”
Therefore, you may need to cash out your insurance or review your insurance coverage, he said.
“Try to change everything that exists to suit your current state of life.”
don't leave anything on the table
If you're leaving your job, he recommended making sure you've reviewed all details of your employer's benefits, including stock options, grants, and restricted stock units.
Also, “[c]Talk to your employer about unused paid time off. Also, find out how to make the most of your paid time off. Some allow you to apply for compensation in lieu of time. Whatever the structure is, do not leave it on the table. ”
Also, if you take out a loan under your employer's retirement plan, be sure to repay it on time, he said.
prepare an exit strategy
If you're a business owner, be sure to have an exit strategy, he said.
“Nine times out of 10, small business owners never take their foot off the pedal completely, but make sure you have a succession plan in place. If you decide to cash out, make sure you do it in a tax-efficient way. Please,” he said.
Consider tax planning
When you're finally ready to take distributions from your retirement account, you need to make sure you've correctly calculated the required minimum distributions, Van Alstyne said.
“If it’s a large amount of money, it might be a good idea to do a Roth conversion where you take it from a qualified account where it grows tax-deferred, convert it, pay the taxes in the conversion process, and then store it somewhere where you can either It might make sense to extend the tax exemption further or create a little more liquidity. ”
And don't forget to consider each state's tax situation, he urged.
“Federal taxes apply to everyone, but each state has a different way of dealing with different sources of income and different marginal tax brackets.”
estate planning
He urged wealthy individuals to consider their estate planning needs.
“Review your current estate and make sure it is adjusted tax-free to fit your estate planning plans after you pass away.”
Always revisit your goals
Even after you retire, continue to review your purpose and goals.
“Okay, what are your retirement goals in terms of your investment strategy? Has your risk tolerance changed?”
He said it's common for people who had a high risk tolerance during their working years to become more risk-averse after retirement.
“If you're working, you can recoup some of your losses with your income,” he says. “Make sure your goals are always aligned.”
Reviewing the elements on this list with your financial advisor should give you a clear picture of what your retirement plans are.
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This article originally appeared on GOBankingRates.com: Transitioning to Retirement: A 2024 Financial Checklist for Baby Boomers
