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| Eight Things to Do Before You Retire |
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| As you prepare to enter retirement, there are issues you should consider to help make your transition into retirement a successful one. We believe history has shown that these activities are best conducted with the participation of a spouse, partner or other family members, as retirement is often a significant point of change for the entire family. |
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| The checklist below can help you organize your activities and better prepare for that big day. |
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| 1. Determine Your Retirement Expenses |
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| As you work through your retirement budget, be sure to consider how your lifestyle might change over the next 25-30 years. You could find you actually spend more during retirement, especially on things like travel, hobbies and entertainment. Health care costs may significantly increase during mid- and late retirement, and financial responsibility for an elderly parent could be an additional consideration. Note that if you plan to move, a change in cost of living will also affect your retirement expenses. |
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| Because needs vary from person to person, it's a good idea to review every expense, from charitable contributions and gifts to basic necessities, to get a clear understanding of what your retirement will actually cost. |
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The Retirement Planning Tools can help you develop a detailed budget and specific retirement income plan for you and a spouse or partner. |
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| 2. Review Your Insurance Coverage |
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| Your insurance needs may change in retirement just as your financial priorities and responsibilities change. Make sure to review your life, health, homeowners, and auto insurance policies so that your coverage is appropriate for your new lifestyle. You may find that life insurance isn't as much of a consideration as it once was, or you may decide that it could help meet your estate planning goals. |
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| Prescription medications or other medical expenses may no longer be covered by your employer or insurance, so investigate how your health coverage and needs may be impacted after you retire. |
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| You should also consider the importance of homeowners insurance — your home is usually your single biggest investment, and its loss could mean that you also lose the secure retirement you've worked so hard for. |
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| 3. Note Medicare Milestones on Your Calendar |
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| Medicare has two parts. Part A is hospital insurance and helps pay for hospital, hospice and home health care (in general, most people do not pay for this). Part B is medical insurance and helps pay for doctors, outpatient care, and other medical services (in general, most people do pay for this). |
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| Depending on your age and whether or not you're receiving or plan to receive Social Security, the Medicare application process, timelines, and premiums may vary. Note that applying late may result in delayed benefits and higher premiums. The resources listed can help you determine how and when you should apply for Medicare. You should also seriously consider long-term care or other additional insurance to supplement baseline Medicare coverage. |
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| 4. Know When to Apply for Your Social Security Benefits |
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| You'll need to apply for Social Security three months prior to the month of your 65th birthday or three months before you wish to start collecting benefits. At the earliest, you may apply at 61 years and 9 months of age, although benefit reductions apply depending on your full retirement age (determined by year of birth) and personal situation. |
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| Because the rules and options can be rather complex, you may wish to speak with a Social Security representative in the year before you plan to retire. |
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| 5. Develop a Retirement Income Plan |
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| Understand that a number of factors may impact your plan: lifespan, distribution rate (how much you withdraw each year), inflation, taxes, market volatility, rate of return, health care costs, and your estate goals. It's also important to understand where your income is coming from and whether your sources are exhaustible or lifelong. |
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| Make sure your lifetime income is greater than or equal to your essential retirement expenses as you work to build your Plan. Finally, remember to reevaluate your portfolio when market conditions change, when your needs change, and if time and asset withdrawals change the balance of your portfolios. |
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Use the Retirement Planning Tools to help you develop a detailed retirement income plan that addresses these factors for you and a spouse or partner. |
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When you turn 70½, the IRS generally requires that you begin withdrawing money from your retirement accounts (excluding Roth IRAs). Calculate your estimated yearly minimum required distribution with the Minimum Required Distribution Calculator. |
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| Depending on your time horizon and goals, an overly conservative portfolio may not stay ahead of inflation. An income plan that takes a number of risks into account can help you fully fund your retirement. |
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| 6. Select Pension Benefits and 401(k) Distribution Options |
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| The decision about what to do with your retirement plan assets when you retire can have significant and long lasting financial implications. Know what the best options are for your situation and understand that some of these decisions may be final. |
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| It is often useful to think about consolidating assets as you near retirement. Leaving funds in a number of places or institutions makes it more difficult to manage your income and your investments because you're juggling statements and putting more time and effort into keeping track of things. You may even qualify for lower account maintenance fees or other price breaks if you consolidate with Fidelity. |
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| Be aware of what the process, timelines, and options are for your retirement plan assets and get appropriate documentation from your employer(s). |
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| If you saved money in a 403(b) plan before 1986, you may be able to postpone withdrawals on some portion of your money until you are 75. |
| 7. Review Wills, Trusts, Powers of Attorney, and Beneficiaries |
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| Everyone should have a will, but a will by itself may not be enough to protect your assets and help reduce estate taxes and other costs, so you may want to look into setting up a trust. Also, be aware that a "Power of Attorney" and a "Durable Power of Attorney for Health Care" are not the same; the former deals solely with control of assets while the latter only provides for health care decisions. |
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| Have your lawyer and/or financial planner review your will, trust, powers of attorney, beneficiary designations, and investment plans to make sure that you and your beneficiaries are appropriately protected. |
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| Oftentimes, legal provisions you've made at other life stages may need to be adjusted to be more appropriate for your current situation. Perhaps your marital status has changed or your estate size and complexity is now different than when you originally drew up your estate documents - take time to reconsider the relevance and effectiveness of your documents as you near retirement. Make sure that in the event you or a spouse should become incapacitated your affairs will be handled in the manner you desire. |
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| 8. Set Aside Emergency Funds |
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| You'll want to make sure you've set aside sufficient funds for unexpected costs. This buffer will ensure that you avoid using assets earmarked for income or growth purposes. As a general rule of thumb, we suggest saving about three to six months worth of expenses for your emergency fund. When you develop your annual budget, it will help you determine what that amount is for you. |
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| Whether it's car repairs, dental work, or travel expenses for a family member's illness or death — not having to worry about how you're going to pay for unanticipated events will make them less stressful to deal with. |
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| Make sure your emergency fund is in a liquid, interest-bearing account; you want to be able to access it without penalties at a moment's notice, but you also want it to be making some return while it sits there aiding your peace of mind. Lastly, remember to replace emergency funds as you use them, so they're available the next time something unexpected pops up. |
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