Pre-Retirement Checklist: Tips for How to Prepare for Retirement

Get tips on what to do if you’re 10, 5 or 1 year out from retirement.

What is your current retirement outlook? If you’re 10 years or less from retirement, does getting everything in order seem like too much to process? Do you know where to even start?

According to a 2018 survey by the Indexed Annuity Leadership Council (IALC), 79 percent of workers surveyed admitted to expressing worry about their retirement.1

The survey also found workers who feel unprepared for retirement lack information about retirement planning, with approximately half feeling only a little or not at all informed.1

When it comes to retirement, here are some important ages to remember:

• 50: The age when you can defer paying income tax on more of your qualified retirement plan contributions (“catch-up contributions”)2
• 59 ½: The age when you can begin withdrawing funds from qualified plans, such as 401(k)s and IRAs, and annuity contracts without incurring a 10 percent federal penalty (unless an exception applies for early distributions)3
• 62: Earliest age when you can start receiving Social Security retirement benefits4
• 70 ½: The age when you must begin taking annual distributions from your qualified retirement plans, except Roth IRAs 5

Whether you’re 10, 5 or 1 year away from retirement, here are some important tips that may help put you at ease with your planning.

10 Years from Retirement

The IALC survey reported workers regretted not saving enough when it came to retirement planning. In fact, 40 percent of workers surveyed claimed their biggest mistake in retirement planning was not saving earlier.1

Have you started to think about your retirement date, and if you can afford to retire within the next decade? If you don’t think you can afford to retire in the next decade, you might need to evaluate your retirement income sources, such as your company’s 401 (k) plan, annuities, or other financial investments.

During this pre-retirement period, you should consider evaluating all your potential income sources for retirement. A retirement planning tool that can help is the Social Security Administration’s website.

The Social Security Administration allows you to set up a free account where you can receive personalized estimates of future benefits based on your earnings, get your latest Social Security statements and review your earnings history.6

Five Years from Retirement

One third of workers think they will spend more during retirement on daily expenses and activities, as compared to their current expenses, while two-thirds of workers believe they will actually spend less, according to the IALC survey.1

What kind of lifestyle do you want in your retirement, and are you financially prepared to pay for it?  According to a 2014 survey conducted by the Bureau of Labor Statistics, total yearly expenses for those surveyed averaged $49,279 for households with people age 55 and older.7

It’s important to take inventory of your assets and annual expenses so you can identify any gaps between your income and expenses.

The Bureau of Labor Statistics also stated survey participants reported housing is the greatest expense for households with a person age 55 or older.7 Think about where you want to live and what type of house, condo or apartment would be best for you in your golden years, and remember to calculate that into your expenses.

Health care is another major expense during retirement. The Lifetime Medical Spending of Retirees report stated people incur an average of $122,000 in medical expenses, including Medicaid payments, between the age of 70 and throughout their remaining years.8

Next on the list is to make sure you have a plan for health insurance, especially if you retire before age 65, which is when Medicare coverage can begin.9

Five years out from retirement is a good time to review and, if necessary, update your estate plan. Have you named the proper beneficiaries or pay-on-death designees on all of your accounts and policies?

A survey from Caring.com, a company that specializes in senior care, showed only 42 percent of U.S. adults surveyed have prepared estate planning documents, including a will or living trust. In contrast, 81 percent of adults surveyed, who were 72 or older, reported having either a will or living trust.10

Another important estate-planning document is a power of attorney (POA). A POA allows you to designate someone you trust to make important decisions for you in case you are not able to do so in the future. A financial POA allows you to designate someone to make financial decisions for you. A medical POA allows you to designate someone to make medical decisions for you.

The Caring.com survey also showed 83 percent of Americans surveyed over the age of 72 have executed a health care power of attorney.10

It’s important to make sure all necessary legal documents concerning your estate are up to date. Keep in mind, estate-planning documents are important legal documents, which should be prepared by a licensed attorney.

One year from Retirement

At one year out, retirement might seem right around the corner. You’ve spent the last decade making sure your finances and savings are in order; now it’s time to make sure you’re ready for a lifestyle change. That might even mean continuing to work in some type of professional capacity. Nearly 25 percent of Americans age 65 and older without a disability are participating in the current labor force.11

Leaving one type of profession might open the door to another in your post-retirement years. You can also make the choice to stay involved in your previous workplace, just in a different role. A retired teacher might become a substitute for the local school district, and a business executive might look into becoming a management consultant.

This is a point where you can choose how you want to earn additional income in retirement. Another important decision to make is how to spend your free time.

Social networks are often built around jobs and professions. It’s important to invest time and resources into physical and mental health and building up a new social network during retirement. This could include getting a gym membership and attending group exercise classes, joining a senior center or finding other social activities outside of work.

In preparing to retire, you have to take all of your financial, health and lifestyle decisions into account. The earlier you start making decisions about life in your golden years, the better off you may be.

While it may seem like a lot all at once, a checklist can help keep your tasks in order, especially as your retirement date gets closer. Download our pre-retirement checklistopens a pdf fileOpens a New Window. so you can start preparing for your future, whether retirement is a decade or just months away.