Are you planning on retiring next year? Do you think that you have the income needed during your retirement? Please take a look at some of the retirement checklist I’ve outlined below:
Examine your pension
For most of those in this category, they may very likely have at least one pension available to them. They may even have more than one pension because of job changes during their working career. It is an asset that belongs to you, that will be providing some of the income needed during retirement.
So what should you consider in this regard? Here is the list.
- Can I take a lump sum into a retirement account or not
- What is the distribution option in addition to the lump sum
- Survivor benefits
- Survivor period certain
- Solvency of the pension fund itself
- Is it at risk if the funding company either goes bankrupt or cannot afford the legacy costs
- What happens if the pension fund is taken over by the Pension Fund Guaranty Corporation?
These are valid questions that you need to know and understand especially if you are retiring next year. It would be a very bad day on the golf course if you suddenly found out that you are only going to be getting sixty cents on the dollar of you pension income due to insolvency. Check your options.
Medicare or health insurance coverage
This is a big deal. Most Americans were covered by health insurance through their employer. So the question is who is going to cover these costs after you leave your company.
Do they have a health care insurance program built into their retirement package? Do not assume this. You need to check on it through your employer’s summary of benefits.
This is going to be a monthly cost and can be quite steep. Do not assume that the Affordable Care Act has made this any cheaper. The very title of this act passed by Congress should be a red flag that it is anything but affordable. Do the research here before you retire!
Social Security Benefits (now or later)
This is another income source that most retirees have accessed wrong to their long term detriment. If you understood that a retirement of 35 plus years (age 62 to 90) could create an aggregate income source close to a million dollars, would you take a second look at how it is accessed?
The rules governing this asset (which you deserve by the way as you have contributed to it) are varied and complex. It is not straight forward. Accessing social security benefits at age 62 will put you at a reduced payout with other income restrictions.
It needs to be compared with your spouses’ social security benefits, or even your ex-spouse’s social security benefits if you are single. Go to a professional who specializes in social security projections based on your own personal statements and retirement plans.
401(k) or 403 (b) Plans
These are savings plans that typically were invested in with pre-tax dollars through income reduction. As a result, they have never been taxed.
This means that you pay the tax when you withdraw the funds. So the best rule of thumb is to assume that about 30% of the value does not belong to you. It belongs to your investing partner known as the federal and state governments. This is a shock for most people.
Here is what you can investigate:
- Leave at previous employer or rollover into an IRA
- How many do I actually have since I worked for several companies in my life
- Time to consolidate into one or two IRA’s to help with management costs and efficiencies
- How much should I distribute as income during retirement
- Rollover into an annuity (why or why not)
These are just a few of the main issues you need to really consider before actually retiring. And retiring next year maybe closer than you think. You need to know your budget and adjust it over the next 30 years for inflation.
The projections will amaze or even shock you. It is best to not do this alone. Get expert advice from a quality advisor if you can afford it. Are you still retiring next year? Wish you the best of your retirement years.