4 Steps That Help Assess Your Financial Security for Retirement

By the time you’re in your 50s, you’ve reached many personal and professional milestones. When you start thinking about what’s next, retirement is likely top of mind, which makes it a great time to assess your financial security for your post-working years.

If that idea feels a bit stressful, you’re not alone: Fewer than one in 10 women ages 50 to 64 feel very confident they’ll have enough for retirement, according to a recent AARP survey. They are also concerned about how the economy and inflation will impact their finances now and in the future.

The good news? There are steps you can take to gauge your financial security now so you can determine what adjustments, if any, may be needed to your financial plan to help you live the retirement you want.

4 steps to help assess your financial security for retirement

1. Check in on your retirement savings and budget

If you have a financial plan in place, you may already have an idea of how much you’ll need for retirement. But are you on track? Take a moment to check on your 401(k), IRA and any other retirement savings accounts you may have. If you’re concerned that you’re falling short, remember that once you turn 50, you’re eligible to make catch-up contributions (among other ways to catch up on your retirement savings).

If you don’t have a target retirement number yet, think more seriously about how you want to spend your time in retirement and what your living expenses would look like as a result. “An advisor can run you through a financial plan and let you know the income you need in retirement and whether you are on track,” says Jennifer Raess, CFP®, Planning Experience Integration Lead at Northwestern Mutual.

In addition to helping you calculate how much you’ll need to maintain the lifestyle you want, an advisor can help you address how parts of your budget will change. During your working years, it’s important to maintain an emergency fund with generally six months’ worth of expenses. But liquidity is just as crucial in retirement, so you may want to consider increasing the amount of cash or other liquid assets you have set aside to cover any unexpected expenses — and to allow you to get through a market downturn before making further portfolio withdrawals for retirement income. You will likely want to make tweaks to your life insurance coverage as well, so you can ensure you will have adequate risk protection.  

“Those out-of-pocket costs really do start to jump up,” Raess says. “Plan for higher health care costs and how you’ll cover long-term care expenses, then budget that in with your other retirement costs so you have extra set aside.” She adds that since Medicare kicks in at age 65, you will want to consider having a plan for your health care coverage to cover the gap if you decide to retire before then.

And when it comes to debt going into retirement, focus on tackling any higher interest rate debt first. “Getting any credit card debt or higher interest debt under control can really free you up and give you peace of mind,” she adds.

2. Calculate your Social Security payments

Social Security will also likely be a key source of retirement income, so this is a good time to figure out the size of the payments you’re projected to receive so you can be strategic about how to maximize the amount. 

“You can claim Social Security as early as 62 but the benefit will be reduced,” Raess says. “If you have the ability to wait to claim at your full retirement age, or even wait a little longer thereafter, this can really help.” This Social Security calculator can help you figure out what you could receive by age.

“Ask yourself: What are your goals? What is your retirement portfolio looking like?” Raess says. “Find out if you may have to work a little bit longer to hit your retirement target or if you are on track with your current plan.”

3. Take stock of all other sources of retirement income

For women, the prospect of retirement can be especially stressful as there are several challenges that can impact your ability to save. So work with a financial advisor to assess all the sources of income you could tap for retirement. This could include your retirement accounts, other investment accounts, annuities, the cash value of any life insurance policies you may hold or any other assets that could produce income in retirement.

As you’re working with your advisor, ask the following questions:

• Is the current projection of your retirement portfolio enough to last?
• Do you need to reevaluate the asset allocation of your investments to make sure that you’re still on track?
• While you’re still working, what’s the largest possible amount you can put toward your retirement and still be comfortable? 

A financial advisor can also help you determine how to draw down from your assets in a tax-efficient way. They can look at your entire retirement portfolio and help you come up with a drawdown strategy that takes your goals, taxes and other retirement risks into account.

4. Get your estate plan in place

If you haven’t already, it’s a good time to start your estate planning. If you’re married, this will give you an opportunity to plan for the possibility of outliving your spouse. But even if you’re not, it’s a good idea to figure out who you would like to name as your powers of attorney and what kind of legacy you’d like to leave behind. Taking estate planning steps now can help ensure that your wishes are carried out for your money and your health while you’re still able to make those decisions for yourself.

“Know where all of your financial accounts are and where to access them if you need to,” Raess says. “Revisit your estate planning documents — are they all up to date and current?” 

Raess explains that while many people draft a will when they have children, they often forget to update those documents over time. She also advises reviewing all your beneficiary designations, as well as any payable on death (POD) or transfer on death (TOD) beneficiaries named on other accounts, because who you name as beneficiaries override what’s written in a will.  

Information is provided for educational purposes only and is not a recommendation for any particular investment. All investments carry some level of risk including the potential loss of all money invested. No investment strategy can guarantee a profit or protect against loss.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.