5 Must-Do Tasks When Nearing Retirement

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Happy BeachWhether it’s consolidating and properly diversifying your 401k’s, IRA’s and other investment accounts, coordinating you health insurance and medicare benefits, or determining when the best time to start receiving Social Security benefits, there are several factors that everyone needs to consider, and plan for when nearing retirement. Below are 5 must-do’s that will put you on the right track as you approach your “golden years”.

1. Look at all of your company benefits.
Your 401k would typically be your biggest benefit, but there may be others for you to take advantage of. For example:

a. Can you continue your medical or other insurance through your soon-to-be-former employer?

b. Are there other benefits that you can continue at reduced group rates?

c. When it comes to your 401k, will you decide to leave it with your employer, roll it into an IRA, or take a distribution? The decision you make with your work related retirement plan can carry significant tax consequences so make sure you explore all of your options before deciding.

2. Consider any pensions from current or former employers.
If you have them, you may have several decisions to make regarding your pension benefits depending on the rules of the plans. One of which may be whether you should take the benefit immediately upon retirement or wait. This usually depends upon the plan rules and your need for income now versus later. In some plans the amount you receive may be greater if you wait until age 65 to claim your benefits.

Additionally, some plans allow you to choose between taking an annuitized lifetime benefit (a fixed monthly amount) or taking a lump-sum payout. Generally, this decision will depend on your overall financial situation and your ability to manage a lump sum of money. Also, as this lump sum would be taxable, it may be a good idea to roll it over into a tax-deferred account such as an IRA. Finally, if you have earned a pension benefit from a former employer, be sure to contact them to get all of the details and to make sure you update your current address and contact information on file.

3. Determine your Social Security benefits.
A big decision you will have to make in regard to Social Security benefits is when to start taking them. While you can start at age 62, there is a significant reduction versus waiting until full retirement age. Further, if you wait until after full retirement age, your benefit will increase until age 70.

If you are married, be sure to include your spouse’s benefits in your planning. There are several strategies and options for married couples to consider. We have assisted several of our clients in finding the best strategy for them to use as they start receiving their benefits. In some cases we have been able to increase their benefits by hundreds of dollars each month.

4. Take stock of all of your retirement financial resources.
Many pre-retirees suffer from financial clutter because they have several old retirement plans from previous employers in IRAs or still in an account in the old plan. Spouses may have similar clutter. Each may have a 401k with their current employers, there might be IRAs, variable annuities, taxable investments, stocks, bonds, mutual funds, etc. There are a lot of financial variables, but they may not be organized in a uniform portfolio. It is crucial that you take the steps to consolidate accounts and get a handle on what you have and how and where it is invested.

5. Decide how much money you will need from all sources to support your retirement lifestyle and compare this with your projected retirement income.
Specifically, look at your Social Security benefits, any pension payments, any part-time income from work, consulting opportunities, etc. Compare these with the amount that you think you will need to support your lifestyle on a monthly basis, to determine how much you need to take from your various investment accounts, both taxable and tax-deferred (IRAs, etc.). If this gap amounts to more than 4% of your nest egg (as a quick rule of thumb) you may need to reassess your lifestyle or possibly plan on working a bit longer, or cutting out some of your discretionary spending.

Please don’t hesitate to give us a call if you need help with any items on this checklist or with your retirement planning in general. Don’t wait until you retire to start planning – knowing where you stand beforehand will help you determine when the best time to retire might be.


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