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Whether you plan to retire tomorrow or in 30 years, you can never be too prepared for your life after work.
“The sooner you start saving for retirement, the more control you’ll have over when you can retire and what your lifestyle will be like,” says Steve Barrilleaux, certified financial planner and owner of Perennial Pension & Wealth. To ensure you’re on the path to living comfortably, this checklist will help you get your financial puzzle pieces in order.
DETERMINE THE BUDGET FOR YOUR DESIRED RETIRED LIFESTYLE
“Will you travel the world or stay close to home? Will you work part-time, volunteer, or pursue hobbies?” asks Dawn Silva, financial advisor for Edward Jones. By answering these questions, you’ll know how much money you’ll need to live the life you want.
IDENTIFY YOUR INCOME SOURCES
(IRAs, 401Ks, SOCIAL SECURITY, INVESTMENTS, SAVINGS)
“How much income will they provide? How much can you withdraw without depleting the assets? Then, determine if the assets enable you to retire or if there is a shortfall,” Silva says, adding that one option to closing the gap would be to contribute more to your IRA.
RESEARCH HEALTH AND LIFE INSURANCE POLICIES
Since most people need to be 65 to get Medicare, other insurance options are individual plans or COBRA. “You should purchase long-term care insurance from an advisor who considers your whole retirement picture, not just the maximum amount of insurance they can sell you,” says Russel Phelps, certified financial planner with Ameriprise.
DISCUSS YOUR PLAN WITH YOUR SPOUSE AND/OR KIDS
Retiring isn’t just a big change for you, it’s a change for your family as well. And you should be clear on what future financial costs will and won’t fit into your plan. “If you have children, you may want to help pay for college. If you’re married, have you built up enough in your retirement accounts to support your spouse should anything happen to you? Will you have enough financial resources to help support your elderly parents should they require assistance?” Silva says.
KEEP IT FLEXIBLE
While it should keep you on track, your retirement plan should also acknowledge unpredictable events that could affect your retirement. For example, time is not always on our side and the opportunity to retire could present itself earlier than expected. “Given the current economic environment, I feel it’s important anyone over 55 spends time thinking about what would happen if their job was eliminated tomorrow,” Barrilleaux explains. A good retirement plan can also address events such as a death in the family, poor performance of risk assets, or an accelerated cost of living. “Work on these scenarios early and have a road map for how you will adjust if they happen,” he says.
REVISIT YOUR FINANCIAL PLAN ANNUALLY
To adjust for changes in goals, the markets, taxes, medical needs and inflation, this is a must. If you need help getting your plan in motion, consult a financial planner. Barrilleaux explains, “Just imagine the cost in dollars and emotional heartache of not preparing and having retirement go wrong.”