Advertiser Disclosure

Checklist For Retirement Planning

First things first. If you haven’t already begun the process of planning for your retirement, the time is now. How can we possibly say that without actually knowing you? Well, for one thing, it’s never too early to start planning for retirement, no matter who you are!

Even if you’re just at the beginning of your career, you can begin laying the groundwork for your future. If you’re closer to the middle of your career, you’ll want to begin thinking about the practical realities that will likely shape your retirement. And not to freak you out, but if you’re nearing the end of your career, you really do have to get moving on a retirement plan as soon as possible!

Wherever you are in your career and however far along you may be on the road to retirement, there are steps that everybody should take in order to be better prepared for this major life transition. Why is preparation so important?

Well, in the simplest of terms, you probably won’t earn as much in retirement as you earn today. So how does that reality match up with your desired lifestyle? What kind of income stream will you have to support that lifestyle? How realistic are your expectations and ambitions for retirement?

Before you can answer these questions, you’ll need to take stock of a few important factors. Start planning for your retirement with a checklist of essential steps.

If you’re feeling super ambitious, check out our tips for achieving the lofty dream of early retirement. Otherwise, read on.

12 Things You Need to Do to Prepare for Retirement

1. Prepare Based on an Expected Retirement Age

Before you can begin to make any meaningful calculations, you’ll need to establish a relative retirement date. In other words, the first step on your retirement planning checklist is to identify the age at which you are likely to stop working full time. Just about everything else in your financial plan will depend on this date.

For most Americans, the traditional retirement age is between 65 and 67, though some employers may mandate earlier retirement dates. Take these factors into account and do your best to anticipate the age at which you hope to retire.

Naturally, any number of unexpected events may change those plans. But as you build your retirement plan, the first item on your checklist is to pinpoint your intended retirement age. Many of the calculations that you’ll make in planning for retirement will be based on this projected retirement age.

2. Take Inventory of Your Assets

In order to determine what you’ll need for retirement, you must begin by determining what you already have. Ultimately, you’ll be making calculations based on how much more you’ll need by the expected retirement age you’ve established in the previous step. So you’ll need to start with a full accounting of everything you have up to this point.

You’ll want to calculate your current savings, the sum total of the assets in your investment portfolio, and everything that you’ve accumulated in your retirement accounts to this point. This would include any sums that you have in 401k, IRA, or Roth IRA accounts. You’ll also want to add to this consideration any concrete assets that figure into your net worth such as real estate holdings, businesses, or items of value. 

Smart Asset points out that you also need to account for the impact that your debts and expenses have on this net worth. According to the article from Smart Asset, you’ll need to “Evaluate your current budget and write down every debt, liability, savings balance, income stream, and insurance policy you have. Don’t forget about properties, vehicles, and other valuable possessions that affect your bottom line. A good way to do this is by creating a worksheet that you can adjust on a regular basis. This process will allow you to assess your current financial situation and plan accordingly.”

Once you check this item off of your list, you should also have a strong sense of your current debt burden. Use this knowledge to attack the next item on your checklist.

3. Pay Off Your Debts

The last thing you want to do is carry unnecessary debt into retirement. Even before you can truly begin to maximize your retirement savings, work aggressively to pay off your debts. 

Start with the high-interest debts that may be connected with large outstanding credit card accounts. Take steps to pay off burdensome medical bills. And consider cutting some of the discretionary spending items in your monthly budget in order to increase the amount you are able to pay toward these debts. 

Forbes advises, “For many retirement plans, it makes sense to continue working until the car loan, student loans, and credit cards are paid off. When your income is fixed, compounding debt starts to eat up a larger and larger portion of it.”

This means that you should prioritize the immediate payment of these debts even ahead of some of your long term savings and investment goals. While these savings and investment goals will indeed form a critical part of your retirement plan, you’ll make more immediate progress by removing the debts and interest payments that stand in the way of effective saving.

4. Maximize Your Retirement Contributions

The next item on your checklist should be to ensure that you’re making the absolute most out of your retirement accounts. Financial advisors recommend maxing out the annual contributions that you are allowed to make to certain retirement accounts, especially if your employer offers matching funds. As noted above, common retirement accounts include 401k, IRA, and Roth IRA accounts. Each carries its own rules on how much you may contribute on an annual basis.

According to Vanguard, “For both traditional and Roth IRAs, the annual contribution limits for the 2022 tax year are $6,000 for those younger than 50 and $7,000 for those age 50 and older. The annual contributions for the 2023 tax year are $6,500 for those younger than 50 and $7,500 for those age 50 and older. For both traditional and Roth 401(k)s, the annual contribution limits for the 2022 tax year are $20,500 for those younger than 50 and $27,000 for those age 50 and older. For the 2023 tax year, they are $22,500 for those younger than age 50 and $30,000 for those age 50 and older.”

If you have the financial flexibility to reach these maximum contribution rates, it is advisable that you do so. If you receive matching funds, this will ensure that you’re getting the maximum benefit from your employer. And even in the absence of an employer matching program, maxing out your annual contributions to your retirement accounts will ensure that you are minimizing your current tax burden.

As part of your retirement planning checklist, Vanguard advises placing roughly 12 to 15% of your monthly income into your retirement accounts. Even if you don’t have the financial flexibility to reach this threshold today, this is the rate of saving that you will ultimately want to progress toward.

5. Know How to Calculate Your Social Security Benefits

One of your major income sources in retirement will come from your Social Security benefits. But how much will you actually make through Social Security?

You’ll want to estimate your Social Security Benefits based on your work history and intended retirement age. Forbes also points out that the longer you can wait to begin receiving your Social Security benefits, the better. 

To this end, Forbes says that “people who put off starting Social Security get larger monthly checks down the road. The difference can be dramatic: Delaying to age 70 can increase benefits by nearly 75%. All things being equal, delaying is a solid choice. All things are never equal, however, because individual circumstances matter.”

Many households will look to financial advisors for assistance in determining their benefits. This may be a good idea if you’re not entirely sure how to calculate your likely Social Security income.

6. Calculate Your Necessary Retirement Income

As long as you’re considering speaking with a financial advisor, this is another item on your checklist that could benefit from expert input. Here, you’ll need to set retirement savings goals based on how much money you will likely need to maintain your desired lifestyle.

This means you’ll need to calculate roughly how much retirement income you’ll need in order to achieve that lifestyle. In other words, you’ll want to begin building the budget you expect to live on once you’re no longer earning an income from full time work.

The article in Smart Asset advises, “Consider where you want to live, whether you’ll have a job (this may sound crazy, but some people like to work in retirement), and what your expenses will be. Try to be realistic in terms of retirement length, too. This can be difficult to predict, but you can always refine your estimate down the line. You should also create a timeline to show when different streams of income will begin. This will help you manage cash flow and determine how much you need to save to retire.”

At that point, your income sources will include your retirement accounts, Social Security benefits and your personal investments and retirement savings. You’ll need to develop a withdrawal strategy that provides the required cash flow for your intended lifestyle while minimizing tax penalties and protecting your long term financial security.

Achieve this balance by doing your best to anticipate your monthly expenses in retirement–both those that are fixed and discretionary. And once again, don’t be afraid to enlist the services of a professional financial advisor for this step.

7. Take Steps to Minimize Income Taxes

To reiterate a point raised throughout this article, a financial advisor can equip you with a number of retirement strategies about which the average individual might not otherwise be aware. This is especially true when it comes to minimizing your tax burden in retirement.

In simple terms, while making the required minimum distributions into your retirement account may shield you from taxes today, you will typically be required to pay some of those taxes as you make withdrawals in retirement. So your goal, as you plan ahead for retirement, is to take steps to keep more of your own money.

To this end, Forbes says that part of your retirement checklist should include a “draw down strategy,” or a way of lowering your tax bracket and consequently reducing the cut of your money that you have to surrender to Uncle Sam in retirement.

According to Forbes, “After you retire but before you start taking Social Security is a golden time to undertake tax-saving Roth conversions. Pay income taxes on those traditional IRAs when your tax bracket is low, and enjoy tax-free Roth withdrawals later in retirement. That’s just one example of why it’s so important to think about draw-down strategies well before retirement. Juggling tax-related issues can be difficult, and a wrong choice could cost you real money. It’s worth getting professional help on this part of retirement.”

Indeed, tax laws are complicated and subject to change. It may be wise to seek professional help as you navigate this step.

8. Simplify Your Investment Portfolio

It goes without saying that you want to invest wisely and diversify investments across stocks, bonds, real estate holdings, and perhaps even cryptocurrencies. Ultimately, the goal is to create a balanced portfolio that aligns with your risk tolerance and matches the level of aggressiveness demanded by your retirement goals.

That said, it is in your best interests to simplify your portfolio management strategy. While diversification is good, unneeded fragmenting of information can be confusing. Part of your retirement planning checklist should include steps to streamline the management of your investment accounts, retirement savings accounts, and other assets.

According to retirement investment manager Vanguard, “As you approach retirement, it’s important to have a clear, accurate picture of your complete investment portfolio. If your portfolio is spread out among several investment companies, collecting and keeping track of all that information will become more difficult.”

Vanguard advises that consolidating your accounts with a single management firm can simplify reporting, lower costs, and reduce fees. Even if it’s not possible to bring the diverse range of financial products in your portfolio under a single investment management roof, you can use this step to organize your investment accounts and create a strategy for regularly monitoring all of your assets in one convenient place.

9. Anticipate Long Term Care Needs

Make sure your checklist includes substantial space for long term healthcare coverage and planning. After all, this is an area in which far too many Americans fail to plan for their actual needs.

The majority of Americans will have out of pocket costs for medical care later in life. Out of pocket costs refer to the amount you’ll likely spend on your healthcare needs beyond what is covered by health insurance and medicare coverage. As you age, these costs tend to go up. Be sure your financial planning accounts for this likelihood. Indeed, for many retirees, medical expenses can become more burdensome over time.

Forbes warns that this is a reality for which many retirees are not adequately prepared. That’s because it can be easy to underestimate just how high medical costs can grow for aging retirees. According to Forbes, “Fidelity estimates that couples who retired in 2021 will need $300,000 to pay medical expenses throughout retirement. Meanwhile, if you retire before you are Medicare eligible, expect to pay a lot for private coverage. BLS says healthcare for those aged 65 and older cost more than $6,600 in 2020. Long-term care coverage, which pays for nursing home facilities or other later-in-life care, is becoming more common. It’s also very complicated, which means that the time to research this is not when you or someone you love can no longer live independently.”

This underscores the critical importance of taking long term care insurance costs into account as you notch items on your retirement checklist. Failing to account for the often considerable costs of long term health care can compromise even the most carefully laid retirement plans.

10. Create an Emergency Fund

Speaking of carefully laid plans, an important rule of thumb in life is not just to expect the unexpected but to always prepare accordingly. If you haven’t already started to build an emergency fund, this is a retirement planning checklist item that you can take on right away. Begin building your retirement fund with whatever financial flexibility you currently have.

According to an article from Smart Asset, “Some experts recommend that you sock away three months of living expenses, while others suggest you save enough for at least a year. Six months’ worth of funds should be enough to cover you in case of emergency. Base the amount of this six-month fund on your expenses, not your income. No matter your current state of employment, this fund is about how much you’re spending. Remember to include expenses currently covered by your employer, like healthcare, because your emergency fund will need to transition into retirement with you.”

In order to get started, consider opening a high yield savings account. This type of account will often allow you to set up automatic withdrawals from a spending account. Start by withdrawing just a few dollars into your emergency fund every week. As you gain greater financial flexibility, consider increasing that automatic withdrawal.

The more work you do today to establish a robust emergency fund, the better your household will be prepared in the event of an unforeseen financial setback or challenge.

11. Estate Planning

This is an important retirement checklist item, though one that can be difficult for many people to take on. This is understandable. Making end of life plans can be an emotionally taxing undertaking. But it’s also an important one, especially if you are in possession of considerable assets, if you have offspring, or both.

Estate planning steps generally include creating or updating your will, establishing power of attorney, and setting up a living trust to manage assets after your passing. Smart Asset says that “You’ll also need to establish guardians for living dependents and appoint beneficiaries on life insurance plans, retirement accounts and shared assets. Consider taxes here too, as you don’t want your estate bequeathed to the IRS. You can also craft a letter with any information that hasn’t been accounted for, like desired funeral arrangements or dissemination of sentimentally valuable family heirlooms.”

In most cases, these steps will need to be handled with the help of a professional. This may be an individual working through a financial advisor to guide you on these steps or a third-party legal professional recommended by a financial advisor.

Your primary goal here is to ensure that your wishes are carried out in the event of your passing, that your assets end up exactly where you want them to at that time, and that your loved ones are cared for when you’re gone.

If you haven’t already taken steps to address these estate planning items, it is an absolutely critical part of building a financial plan for retirement. And the more attention you give to these difficult matters today, the easier it will be to focus on enjoying your retirement later in life.

12. Review and Adjust

This is one item that you can’t exactly check off. That’s because, if you’re doing it correctly, this should be an ongoing process. You’ll want to regularly review your retirement plan to ensure it’s on track. You may need to adjust contributions, investments, and goals as your situation changes.

In an ideal world, your earning power and income will grow as your career advances. This means you may be able to revisit each of the items on this checklist over time with greater financial flexibility. As your income and assets grow, you’ll want to explore additional ways of optimizing your investments, making the most of your retirement accounts, lowering your tax burden, and more.

Some of the best financial advisors will provide ongoing review and regular recommendations for how to adjust your financial plan as conditions change and evolve. This is yet another way that a good financial advisor can help you reach your retirement goals with greater confidence and clarity.


Not sure where to get started on your retirement checklist? 

If you’ve read the article to this point, you probably already know what we’re going to say. You should speak with a financial advisor. A good financial advisor can help you check off each of these important steps on the way to developing a financial plan that makes sense for you. And the right financial advisor will help you build a personalized strategy for reaching your retirement goals.

As you go through the checklist above, don’t be afraid to ask for help. Check out our tips on how to choose a financial advisor to learn more.