How Do I Start Planning for Retirement?

What happens when saying goodbye to your 9-to-5 isn’t a distant dream anymore; when the homestretch is in sight and the distance between you and retirement is measured in years, rather than decades?

We hope you have been doing a good job building a nest egg that you’ll use to create income in retirement. Maybe you even have a financial plan in place. But as the big day gets closer, you may be asking yourself, “How do I start planning for retirement? Here are 10 things you can do to make sure the transition goes as smoothly as possible.

1. Check in with your partner (if you have one)

Couples often head into retirement without discussing, in detail, how they want to spend their time post-career. What if one of you envisions a home in the mountains and regular visits from family and friends, while the other sees a low-maintenance condo and lots of overseas travel? The sooner you compare notes with your loved one, the easier it will be to create a shared vision for retirement that can make you both happy.

2. Run the numbers

Once you’ve determined the lifestyle you want, put a price tag on it and create a retirement budget based on those needs and wants. Once you have a decent idea of what things will cost, it’s typically smart to cover essential expenses like food and housing with guaranteed income sources, such as Social Security, pensions and annuities. You’ll also want a cash reserve (cash value you have accumulated with permanent life insurance can work for this)* in addition to investments for growth. If the numbers don’t work, you have some time to make any adjustments to your plan if needed.

3. Maximize Social Security

When and how you take Social Security will affect the total benefits you’ll receive over your lifetime. The Social Security Administration has an online tool that allows you to compare your estimated retirement benefits at age 62 (the earliest age you can claim your benefit), your full retirement age, and age 70 (the latest you should wait to claim your benefit).  Taking your benefit before your full retirement age will result in a reduced benefit. If you claim after your full retirement age, your benefit will grow your benefit by 8 percent each year you delay up to age 70.

4. Trim your debt

While some debt, such as a low-interest rate mortgage, can be OK once you retire, it’s a good idea to get rid of any high-interest debts before you retire — think credit card debt or personal loans. Look to contribute extra monthly debt payments as soon as possible with the goal of being free of bad debts before you retire. Your extra payments, however, shouldn’t cut into the contributions you’re making to your retirement accounts.

5. Take advantage of the catch-up provision

Once you turn age 50, the IRS allows you to set aside an extra $7,500 (in 2023) in the most common workplace retirement plans and an extra $1,000 (also in 2023) into an IRA. Assuming you can afford to do so, contribute as much as you can to your tax-advantaged retirement plans. Maxing out your remaining five to 10 years of contributions will likely pay off in the long run.

6. Plan for health care costs

Health care costs tend to increase as we age, so make sure you have a plan to cover them. If your employer offers a Health Savings Account (HSA), consider funding one. Contributions are tax-deductible, distributions for medical expenses are tax-free, and any funds you don’t use roll over from year to year and can grow tax-free. And don’t forget to enroll in Medicare when you become eligible at 65. If you miss your window for enrolling, you’ll have to pay a penalty for the rest of your life.

7. Review your estate planning documents

Make sure your living will, powers of attorney (health care and financial), any other estate planning documents (such as wills or trusts) and beneficiary designations are up to date and reflect your current wishes.

8. Research long-term care

Long-term care isn’t covered by Medicare, yet you or your partner may need extended care at some point in the future. Talk to your financial advisor about the impact a long-term care event could have on your retirement plan and make sure you’re in a position to manage the risk.

9. Consider an annuity

One of the biggest challenges facing retirees is knowing how to make their savings last. Annuities, which offer the ability to generate a lifetime stream of income that’s shielded from market fluctuations, can help. The key is selecting the right type of annuity for your situation. A financial advisor can help you understand your options and decide whether an annuity is right for you.

10. Review your plan regularly

Asking yourself, “How do I start planning for retirement?” is an important launching point for a productive conversation about the future with your spouse, partner or other loved ones. A financial advisor can help you build and update your financial plan for retirement. As you get closer to the big day, it’s a good idea to meet regularly — at least yearly — with your advisor to make sure you’re on track for the retirement of your dreams.

*The primary purpose of life insurance is to provide a death benefit.  Utilizing the cash value through policy loans, surrenders, or cash withdrawals will reduce the death benefit; and may necessitate greater outlay than anticipated and/or result in an unexpected taxable event.