Your Retirement Checklist
What does an artist and someone planning for his or her later years have in common? Each visualizes their final objective, but the process is fluid. Although your situation is unique, there are basic elements you can use to sketch an effective retirement plan.
Pointers for the Accumulation Phase
An important action you can take is to determine your retirement needs. This task involves identifying your potential retirement expenses, as well as estimating the amount you might receive from each potential source of retirement income (Social Security, pensions, personal investments, and employment earnings).
Once you're nearing retirement, it will also be necessary to craft a solid plan for distribution of your assets. For example, do you know one of the greatest risks that retirees face? The possibility of outliving their money, according to the Society of Actuaries.
That's why it's essential to determine an appropriate annual withdrawal rate. This amount will be based on your overall assets, the estimated length of your retirement, an assumed annual rate of inflation, and how much your investments might earn each year.
Retirement Planning Checklist
Find the category that best describes you. After answering the questions, bring the list to a qualified financial professional who can help make sure your retirement plan is on target.
Saving for Retirement
1. Have you performed a comprehensive retirement needs calculation?
2. Are you contributing enough to potentially reach your financial goal within your desired time frame, by maximizing contributions to tax-advantaged retirement accounts, such as your employer-sponsored retirement plan and an IRA?
3. Is your asset allocation aligned with your retirement goal, risk tolerance, and time horizon?
4. Have you determined if you might benefit from contributing to a traditional IRA or a Roth IRA?
5. Do you review your retirement portfolio each year and rebalance your asset allocation if necessary?
Nearing Retirement
1. Do you know the payout options available to you (e.g., annuity or lump sum) with your employer-sponsored retirement account, and have you reviewed the pros and cons of each option?
2. Have you considered your health insurance options, (i.e., Medicare and various Medigap supplemental plans or employer-sponsored health insurance), out-of-pocket medical expenses, and other related health care costs?
3. Have you contacted Social Security to make sure your benefit statement and relevant personal information are accurate?
4. Should you purchase long-term care insurance? If so, have you investigated which benefits are desirable?
5. Is your asset allocation properly adjusted to reflect your need to begin drawing income from your portfolio soon?
6. Have you determined an appropriate withdrawal rate of your assets to help ensure that your retirement money might last 20, 30, or more years?
7. Have you figured the amount of your annual required minimum distribution (RMD) and developed a strategy to reduce your tax burden once you're required to begin taking RMDs?
8. Have you appointed a health care proxy and durable power of attorney to take charge of your health and financial affairs if you are unable to do so?
9. Have you reviewed all your financial and legal documents to make sure beneficiaries are up-to-date?
10. Are you making effective use of estate planning tools (such as trusts or a gifting strategy) that could reduce your taxable estate and pass along more assets to your heirs while also benefiting you now?
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