Retirement Financial Planning Checklist
Getting ready for retirement? Planning for a financially secure retirement can be overwhelming and confusing. Making sure you’ve got the right things in place and preparing ahead of time for a secure retirement can save you from unexpected disappointments and unpleasant surprises. If you’re getting started or just want to confirm if you’re on track with your financial retirement plan, we’ve pulled together handy Retirement Financial Planning checklists to help you better prepare and be ready for your retirement.
Check Your Retirement Income Sources
Where will the money for retirement come from? How much will each source provide and for how long? Confirm what retirement savings and income sources you can count on such as the following: Social Security — You can get estimates of your benefits (retirement, disability, and survivors benefits) by visiting the Social Security Administration’s “my Social Security“ website and creating an account (get someone to help if necessary). Once you’ve done that you will have access to your benefit estimate and earnings statement as well as Medicare taxes you’ve paid. Pensions — To find out about your pension you can use a few helpful resources such as: Labor Department’s Employees Benefits Security Administration (toll-free number 866-444-3272). Pension Rights Center website American Academy of Actuaries’ Pension Assistance List (offer free assistance to individuals interested in checking their pension plans’ calculations) Annuities Life insurance values (if there are any) Savings accounts Income from investments and retirement funds (including, stocks, bonds, trusts or rental income from real estate) Value of real estate or personal property (vehicles, jewelry, gold, collectibles, etc.)
Figure Out How Your Retirement Income Will be Taxed
The gross-value of your retirement income is often (mistakenly) used by many to estimate what money they will have available. The taxes on your various sources of retirement income need to be confirmed so you can have a realistic idea of your retirement income. You don’t want to be surprised and left short when the time comes for retirement.
Social Security Income
Social Security income may be taxable depending on the amount of other retirement income you have. You may have to include up to 85% (ranges from zero to 85%) of Social Security benefits on your tax return as taxable income. A tax worksheet formula takes into account your ‘combined income’ to determine how much your benefits will be taxable each year.
Having a high amount of monthly pension income can result in a high tax on Social Security benefits. Only those the other hand, a retiree with virtually no other retirement income, will most likely get their Social Security benefits tax-free and not pay income tax.
IRA and 401(k)
Withdrawals from retirement accounts are taxable. This means IRA withdrawals, as well as withdrawals from 401k plans, 403b plans, 457 plans, etc., will be considered taxable income. Again, the amount of tax you pay depends on your total income, which deductions you have and the tax bracket you fall into that year. For example, if you have significant medical expenses, you will also have more deductions than income so you may not need to pay tax on those withdrawals during that year. Keep in mind Roth IRA withdrawals are tax-free if done correctly.
Pensions
When calculating whether your pension income is taxable, you need to check if the money went in pre-tax or after paying taxes. Most pensions accounts were paid in with pre-tax income so will be counted as taxable income on your income tax report. If you already paid tax on the money you put into your pension, then you won’t pay again in retirement.
After going through the above checkpoints, you should have a better idea if you are ready to retire. Knowing when it’s the right time to retire can depend on a few things such as the following:
Do You Have Enough Saved For Retirement?
You’ve calculated your retirement income sources, applicable taxes, and a retirement budget. So, what’s the verdict? Do you think your nest egg is sufficient? If you are not in the best financial shape, you might want to consider pushing forward your retirement date a few years and keep working (even part-time) to reduce any existing debt and increase your savings. This is where a financial advisor can help you weigh the pros and cons of retiring later, delay taking some retirement income such as Social Assistance and re-allocating your savings into more profitable retirement investments.
Are You Ready Emotionally To Stop Working?
For some people, their work and personal identity are very closely connected. If your closest friends are your work colleagues, you may want to continue working for a few more years or scale back and work part-time if possible to ease into a new retirement lifestyle. Having some extra free time while still working can give you the chance to get involved with other people and activities outside of work. This will help you build up your retirement network of friends.
Time For Your Significant Other
If you and your partner plan to retire at different times there may be the need to adjust your daily schedules and domestic responsibilities. If one is still working, they may not be available to do all the things together. It’s important to have a plan that works for both of you. That may even include the delay of full-retirement for one spouse until the other is ready to retire. Whatever you decide to look at what you’d like to do during retirement and the goals you have each or together as a couple.
Your Retirement Wish List
For many people, their goals for retirement include more than just gardening, golf, and travel. Some decide to pursue lifelong dreams and projects such as starting their own business, writing a book, starting a charitable organization or just following their passion. If you have clear goals and a strong motivation for your retirement lifestyle that includes meaningful activities and projects, should help guide you in picking the right time to kick-off your retirement.