Countdown to Retirement – An Important Checklist To See If You Are Ready

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The final step before retiring requires addressing a series of financial questions before you set the actual date. Not all retirement issues are financial. Some of the most important issues you need to face will involve lifestyle decisions. How will you spend your time when you’re not working anymore? Will you work as a volunteer or maybe start a new avocation? How frequently will you travel if at all? Will you spend winters in a warmer climate? These issues will be addressed in detail in future newsletters but for now, let’s assume you have already addressed the big financial issues – you have enough money to retire and if you are under age 65 and ineligible for Medicare, you have determined how you will cover your health insurance needs. Here are some other financial questions should you address.

Retirement plan options

Traditional pension plans are becoming rare. But if you are retiring from a company that still offers retirees a pension, you will have to choose a method for how your monthly benefit will be calculated. These options will involve whether you want to include a benefit for your spouse – joint life expectancy for all or some portion of the benefit. You may want to consult a financial planner to help you evaluate this option. Once you make your pension election the decision is often irrevocable. Generally, the option based on a single life expectancy will offer a higher monthly benefit, and the option based on joint life expectancy will provide lifetime income and provide more security for you and your spouse.

Even today’s more popular defined contribution plans, such as 401(k) and 403(b) plans offer a choice of lifetime income or a lump sum distribution. You will need to consider carefully all the options available to you. Some of the options could have serious tax consequences if the wrong choice is made.


A key ingredient in the recipe for retirement success is the ability to control your spending and stay within your projected cash flow needs. High balances on credit cards can translate to a monthly bill of several hundred dollars and can be a red flag that you cannot control impulse buying. You should eliminate your credit card debt while you are still working. Make sure the balance is paid off in full each month and that this expense is calculated into your future spending estimates. Home equity credit lines pose the same problem when they are used to subsidize spending.

The desire to be debt free can also work against you when you have a balance on your mortgage and plan to use the lump-sum distribution from your retirement plan to pay off your house. Doing so could reduce your monthly bills substantially but at what cost? Paying an additional 20% or more in taxes to pay off a 5% mortgage may not be a wise financial decision. Particularly if you are in the last few years of the amortization and only a small amount of the payment is going to pay interest.

Tax Planning and Social Security

Careful planning is required to generate the income you want in retirement with the smallest tax implications possible. Following this advice will help assure you will not outlive your assets because fewer will be needed to pay income taxes. If you have followed The New Three-Legged Stool™ strategy, you will have three sources of funds to draw from. You will need to run tax projections to determine how much should be withdrawn from each of the three legs to minimize your taxable income.

Social Security planning goes hand-in-hand with tax planning. You will need to get a copy of your most recent Social Security estimate of benefits. You may want to make some changes in how your investment assets are positioned before you start drawing benefits. Not all of your Social Security benefits will be taxable. Smart planning could put you into a position where none of them are taxable.

Retirement and estate planning goals

Your retirement plans can have a major impact on leaving a financial legacy for your children. Pre-tax accounts such as IRAs have the worst tax consequences for your heirs. Tax-free Roth IRAs have the best tax consequences. For your children to minimize negative tax implications and maximize the positive ones you need to have the beneficiary designations set up properly.

This is also a good time to consider your charitable goals. Since charities don’t pay income taxes and your children do, the charities should be the beneficiaries on your IRAs and your children the beneficiaries of your Roth IRAs.

Final thoughts

Retirement planning is an ongoing process. Picking up your gold watch does not mean you can rest easy from now on. Each year, you will want to check in with your financial adviser to make sure your financial strategy is performing as expected and make any adjustments that may be needed to help you stay on track.

Ease into your new retirement lifestyle. Don’t make dramatic changes, such as selling your house and buying a new one in another part of the country. What may seem like a good idea could turn out to be a financial disaster. You should consider renting a place first. Take your time to make sure this is really what you want to do and where you want to live.

Rick’s Insights

  • Most retirement distribution options are irrevocable elections. You should
    seek professional guidance to help you make the right choice.
  • Ongoing credit card debt could be a sign of spending problems. You must be
    able to live within your means to have a successful retirement.
  • Avoid big lifestyle changes with permanent financial implications when
    beginning retirement. Test drive the changes first to avoid costly regrets.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan,
how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still
have the income I want?

Rodgers & Associates answers questions like these every day.

Get Personalized Answers
2025 Lititz Pike, Lancaster, PA 17601
Phone: 717-560-3800, Toll-Free: 888-876-3437