Make A Retirement Planning Checklist

Retirement planning can inspire a lot of contrasting emotions. There’s the excitement of making travel plans, sleeping in on Mondays and saying goodbye to the boss. And there’s also the fear of outliving your money, boredom or making a huge financial mistake that could lead to a gigantic tax bill.

The best way to deal with your retirement fears is to face them head on. The sooner you make a retirement plan, the better. A 2020 TransAmerica survey found that only 18% of retired people have a written plan for dealing with life after labor, and only 9% of retirees frequently discuss retirement planning with their family and friends.

If you are planning for retirement now you’re already ahead of the curve. To help your process, check out this handy checklist of 13 things to think about for your retirement plan.

1. Know the Numbers, Ignore the Numbers

The world of retirement is full of very important-sounding numbers. They’re useful in the broadest terms—sometimes just for their shock value. For instance, they can tell you if you’re far behind in saving.

There’s no question that you need to know about stuff like the 4% rule or the 80% rule. The latter suggests your spending will decline by roughly one fifth  in retirement compared to  your final year of working.

Then there’s the 25x rule: Multiply your annual budget amount by 25 and you’ll find “the number” you need to retire comfortably. Figure you spend around $75,000 every year? The 25x rule says you’ll need around $1.9 million saved before you retire.

It’s good to calculate figures using these rules on the back of the proverbial envelope, to have a sense of whether you’re on pace to have enough stowed away before you stop working. But you shouldn’t get attached to these figures. Individual circumstances vary so much they aren’t always very useful when you make a real retirement plan.

The 4% rule is the most suspect number of all, since retirement-friendly investments like Treasury bonds are yielding so little these days. Meanwhile, low-income retirees often spend more than 80% of their working income in retirement. Those in good health entering retirement tend to spend less on health care during their golden years.

Get a high-level view of your retirement with these numerical guides, then move on and get more intimate with your own real-life situation.

2.  Take Stock—and Bonds, Cash and Social Security

Begin by calculating your net worth: Take stock of all your assets and liabilities, and get a solid understanding of your own personal balance sheet.

This advice sounds obvious but you might miss something, like how much your available income will change based on when you decide to take Social Security. Or how dramatically your returns on your investments can change in five years. Or how much inflation and property taxes might eat up “the number” you come up with.

3. Deal with Your Debt

Here’s an uncomfortable truth you’ll need to face: Retired people stop getting biweekly paychecks but they still face monthly payments. TransAmerica’s survey found that 46% of retired people have non-mortgage debt to pay. That’s a potential disaster to retirement planning.

Once upon a time, even holding mortgage debt in retirement was considered a major mistake. With the advent of easy, low-cost refinancing—plus the supersized mortgages these days—being mortgage-free by age 65 is perhaps out of reach for many people.

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.

4. Develop a Spending Strategy

Many people underestimate the higher first-year costs of retirement—think of them like start-up costs. You’ll probably spend more on travel than you expected, you might have some elevated costs when switching to Medicare, and if you downsize your home there are closing costs.

It’s a normal part of retirement, and you can prepare for the costs by developing a spending strategy. Here’s one number to keep in mind. Bureau of Labor Statistics (BLS) data shows the average American aged 65 to 74 spent nearly $48,000 in 2020. Using the 25x guideline we noted above, the average American would need $1.2 million to support that kind of cash flow.

5. Have a Draw-Down Strategy

One of the trickiest parts of retirement is maximizing your income while minimizing Uncle Sam’s cut. Most people have a variety of tax situations in retirement, like required minimum distributions (RMDs), tax-free income from Roth IRAs or Medicare income limits.

Here’s one thing to think about: 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.

6. Take Time to Learn about Annuities

Annuities can be an important part of your draw-down strategy, as they provide an effective way to consolidate your accounts and provide a steady retirement paycheck.

These guaranteed-income vehicles have gotten a bad rap in recent years, for good reason. Some annuities are complicated and fee-laden, and are not suitable for many people. That means you need to take your time researching annuities.

As with many things, simpler annuities are better. Single premium immediate annuities (SPIAs) are relatively straightforward takes on the annuity strategy, and are worth looking into.

7. Use Financial Advisors the Right Way

financial advisor can help a lot with retirement planning. Unfortunately, many people use financial advisors…the wrong way. Instead of paying for valuable work on estate planning and tax strategies, some rely on advisors as an expensive source of stock tips.

According to the TransAmerica survey, respondents who employed a financial advisor predominantly relied on them to make retirement investment recommendations (80%). Far fewer used their advisors to calculate retirement income needs (31%), develop strategies for spending down savings (23%), general financial planning (21%) or tax planning and preparation (23%).

This is an upside down view of the best use of financial advisors. Plenty of people can invest money competently themselves, but need help most when it comes time to turn their nest eggs into steady, lasting income. Spend your hard-earned money on that.

8. Start Social Security at the Right Time

You probably understand 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. A real-life variable that retirement author Liz Weston has reminded me of many times is that men often forget to take into account the impact of their wives’ payouts when they make Social Security decisions. In short: Married men tend to claim their benefits earlier, which severely reduces their widows’ monthly checks later in life, since women live longer than men. Entire papers have been written about the problem.

Plan ahead by planning to spend down retirement savings in order to postpone Social Security withdrawals.

9. Plan for Medical Expenses, Including Long-Term Care

Medicare is great-ish, but people don’t realize that Medicare doesn’t pay for everything. One in five Medicare recipients pay for Medigap coverage, for example, which costs roughly $150 a month.

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.

10. Pick a Date to Retire

This sounds blindingly obvious, but it’s anything but. After you’ve worked out how much money you’ll have for retirement and how much you’ll be spending once you’re retired, commit to a set date to stop working. Just remember that no battle plan survives contact with the enemy.

People tend not to estimate their date of retirement very well. Surveys by the Employee Benefit Research Institute (EBRI) continue to show that almost half of retirees say they left the workforce earlier than they had planned. One reason for this is that people who lose their jobs in their 50s and 60s often have a very hard time re-entering the workforce.

One option for those who suffer through a layoff is to muddle through a job, if possible, even if it comes with no benefits. The upside, according to a recent paper by Boston College, is that folks with low savings can use these part-time gigs to delay claiming Social Security and thereby increase their retirement income when they do finally retire for good.

11. Keep Working as Long as You Can

One great way to strengthen your retirement, then, is to keep working. Every dollar earned is a dollar you didn’t have to draw from your retirement savings.

Long before you hand in your final resignation, make a plan for part-time work after you retire. Start talking yourself up as a consultant, create an Etsy store or take up weekend Uber driving. It’s about more than just money, you can find purpose and meaning in a retirement side hustle.

Part-time work in retirement is becoming very common. A 2019 AARP study found that more than 20% of Americans over 65 were working or looking for work, about double the rate from 1999.

12. You Need a Multi-Tier Retirement Investing Plan

Once upon a time, retired folks parked their money in certificates of deposit (CDs) and Treasury bills, and put things on autopilot. But those days are long gone.

Today, a 65-year-old retiree needs to be a long-term investor, with a certain portion of their portfolio invested aggressively in equities. But let’s put what long term means here into perspective: Money you’ll need to pay for living expenses over the next five years should be readily accessible in safe investments.

Put at least five years of living expenses into very liquid, very safe assets, then invest the rest as you did when you were working. This shift to safety can creep up on you, so make sure your plan anticipates a slow roll of longer-term risky investments into shorter-term safe ones as the years go by.

13. Don’t Forget Your Estate Planning

You’ve worked your whole life, so make sure to leave the legacy you want. Double-check that each account has a declared beneficiary. Update your will. Give cash gifts to loved ones up to the taxable limits so you and they can avoid inheritance taxes later. Research charities using services like if you’re inclined to give the money away.

Dying without a financial plan is at best a massive burden on survivors, and at worst it means Uncle Sam could ravage your life’s savings.