A research study conducted by Fidelity, Putnam and the Employee Benefit Research Institute revealed that most workers, even those rapidly approaching retirement, haven’t prepared a retirement budget or created a plan to ensure they’ll have enough income. Having this kind of “take-it-as-it-comes” attitude can lead to many unpleasant surprises down the road.

It’s a better idea to plan now for what could lie ahead. Here’s a checklist to get you started:

10 years prior

  • Consider moving to a cheaper community so that your retirement assets last longer. Your geographic location has a significant impact on your expenses.
  • Think about how you will spend your time. Your activities also influence how much money you’ll need.
  • If you’re not already contributing the maximum to your 401(k), IRA, and other retirement savings vehicles, now is the time to up the ante. Your chances of living to a very old age are better than ever, that’s why many financial planners now use age 95 as their default life expectancy.
  • Think about paying down your mortgage before you retire. Not having a mortgage means drawing less from your retirement accounts, letting them to continue to grow tax-deferred, and reducing your overall taxes.

Five years prior

  • Decrease your portfolio risk by decreasing the amount of company stock and stock options in your portfolio. Talk with a CPA about the tax implications of such a move.
  • Contact Social Security for an estimate of your monthly benefits.
  • Gather info for any pension benefits you have accrued and how much you can expect to receive.
  • Estimate available investment income based on the future value of your assets.
  • Think about healthcare and long-term care expenses. Medicare isn’t an option until you reach age 65. You may also need a Medicare supplement to cover what Medicare doesn’t. Also keep in mind that even if your employer offers retiree health coverage now, it may not in the future or it could become unaffordable, so have a backup plan in place.
  • Start putting together a budget based on your anticipated income and expenses.

Two years prior

  • Refine your budget and your asset allocation. If retirement doesn’t seem financially possible, consider working a little longer.
  • Reconcile your Social Security estimates to make sure your wages have been reported properly over the years.
  • Take a few extended visits to the area where you plan to retire. Be sure you visit during different seasons to see if you’ll like living there.

One year prior

  • Decide whether you will leave your 401(k) and other retirement accounts where they are, or roll them over into an IRA.
  • Update your budget and review your asset allocation.

Three months prior

  • Make arrangements for your rollover to be sure the money is available when needed.
  • If you’re moving, perform any necessary repairs to get the house ready to be sold, and start packing.
  • You must apply for Social Security three months before you want to start receiving benefits. Medicare requires you to enroll three months prior to your 65th birthday. If you’re already receiving Social Security, you will be enrolled automatically. Otherwise, you should enroll online or by phone with the Social Security Administration.

If you have any questions or concerns about any of the information covered above call us today at (860) 589-3434, and one our Tracy-Driscoll Insurance & Financial Services retirement planning specialists would be happy to help.

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