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The Ultimate Retirement Readiness Checklist

Craig Stephens

How do you know when you're ready to retire? You may have a dollar amount, age or career milestone in mind that's associated with your retirement date. But before you leave your profession, money and lifestyle considerations should be carefully scrutinized. Aim to enter retirement with a comprehensive plan that ensures you're in complete control of your money and life. Thorough preparation will help you to weather any unexpected surprises. Your retirement plan should include everything that will impact your lifestyle before the big day arrives.

[Read: Year-End Retirement Planning Deadlines for 2017.]

To help you plan, here's a comprehensive retirement readiness checklist. Compare this list with your current plan, and consider how each item will impact your personal and financial well being.

Health care. Determine how you will obtain health care, and estimate the costs before your retirement begins. Figure out what level of care you can afford, where it will come from and how it will change once you are eligible for Medicare. Also, leave room in your budget for unexpected costs that can occur outside of your insurance plan.

Housing. Your comprehensive retirement plan should address your long-term housing needs. Determine if your current home is suitable for the rest of your life and whether you want to downsize or relocate to save money. Housing needs can change over the course of your retirement, so think about different scenarios long before they happen.

Spending estimates. Estimate how much you expect to spend on an annual basis in retirement. This number can help you determine how much money you need to retire comfortably. Create a detailed retirement budget to estimate your monthly and annual costs, and use this analysis to formulate a retirement savings goal before you leave your job.

Retirement savings. Based on your estimated annual spending, verify that your retirement savings goal is enough to live on for the rest of your life. For a ballpark number, multiply your estimated annual spending by 25. That number can be used as a baseline retirement savings goal. For example, if you expect to spend $60,000 per year in retirement, you will need to save around $1.5 million. If you receive a pension or other form of reliable income, your number will be smaller. You can subtract your expected retirement income from your annual spending and recalculate the savings number.

Income sources. Tallying the amount you will receive from various income sources enables you to better estimate how much you need to save. Most retirees receive Social Security benefits, and some people also have pension or annuity income in retirement. If these income sources and gradual withdrawals from your retirement savings don't cover your bills, you may need to cut your spending or find additional sources of income.

Continued work. Some retirees continue to work out of both necessity and pleasure. Even a small amount of additional income can dramatically improve your retirement cash flow. Earning money through part-time work or a small business can be personally rewarding. If you do continue to work, find a job or project in line with your interests or hobbies to stay engaged and satisfied.

[See: How to Pay Less Tax on Retirement Account Withdrawals.]

Draw down strategy. Once you have your estimated spending and income sources identified, determine a draw down strategy from your retirement accounts. Consider which types of accounts you should draw from first. Taxes will be due on traditional retirement account withdrawals. If you can, leave your tax-advantaged accounts untouched for as long as possible. Traditional IRAs and 401(k) plans will be subject to minimum required distributions after age 70 1/2. However, Roth IRAs don't require distributions in retirement, so let those accounts grow for as long as possible.

Maintaining health. Promoting good health in retirement is important for keeping health care costs down and increasing your longevity. There could be costs associated with a healthy lifestyle such as a gym membership or fresh food options. Schedule time for exercise, and make a budget for healthy living expenses.

Activities to keep busy. Some younger retirees stop working only to find out they miss work and want to go back. Develop hobbies and interests while you're working that you can continue in retirement. Without a plan, you may become bored and uninspired in retirement. Keeping both your mind and body active can contribute to greater happiness and longevity.

All the stuff. People tend to accumulate a lot of stuff in their home throughout their working years. If you don't plan to downsize and force yourself to declutter, have a plan for where all your possessions will go. Begin to remove things from your home that you won't need when you retire. Pick organizations that can benefit from your unwanted clothing and furniture. Don't assume your children want to inherit your cherished items.

Travel plans. Retirees often say travel is at the top of their retirement to-do list. Aim to accomplish more rugged bucket list items in the early years of retirement to capitalize on your health. Luxury travel can wait. Think through which travel destinations are a priority, and see as many as you can while your money and good health are intact. Travel becomes more difficult as you age.

Estate plan. Review your estate plan at least every five years to make sure each component is sound. In addition to working with an estate planning specialist, create your own one-page plan by writing down all your financial information in one place in case of a sudden loss. Communicate frequently with your spouse and heirs to ensure a smooth transition of assets.

Loss of a spouse. It's unpleasant to think about a spouse passing away. But make an effort to talk with your partner about what you both would do in the event of a passing. Consider whether you could stay in the same home, continue working or volunteering and if there is a pension or financial benefit tied to the life of each partner. Identify any gaps in financial needs, and consider steps to protect loved ones.

[See: 10 Ways to Get Ready for Retirement After Age 50.]

Long-term care. Those who are healthy and still working rarely think about the possible impact of a long-term health issue that requires full-time care. But the best time to begin planning for potential long-term care needs is while you are still employed. Are you able to self-insure for potential long-term care needs or assisted living expenses? If not, you may want to consider long-term care insurance as part of your comprehensive financial plan.

Legacy. Retirement is a time to reflect on your life and consider your lasting impact on your family, community and the world. Retirement is your last chance to influence how you will be remembered. Live each day with that in mind.

Craig Stephens is a blogger at Retire Before Dad.



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