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5 Steps to Pre-Retirement Planning

By Alex Roig

For many, the thought of preparing to make the transition from the daily grind to full retirement brings both a collection of exciting possibilities and terrifying logistical concerns. We meet many of our client families for the first time as they start to give deep thought to how to begin this process. These clients are still working, but are starting to come to us with questions about getting ready for that next phase. Even if your finances are in good order, you’ll still need to make a few preparations now that will ease the transition into retirement when it comes. Our checklist below can get you started thinking about these things, and we can help answer all the specific questions you have about your own situation.

1. Get your physical house in order. Begin or take a new look at your budget for tackling any major home repair and improvement items that are likely to be a factor in early retirement. Have your home’s major systems (such as HVAC, roof and major appliances) reviewed for efficiency and proper function. Plan your finances accordingly for any that need replacing or are likely to need replacing soon. Do you plan to move to a new home in retirement? Now is the time to update your budget for moving expenses and down payments as well.

2. Plan for rising costs of living. Work with your financial planner to plan for the cost of inflation, not just your current cost of living. Our team can help you prepare for the rising costs of daily life in the future, and help you estimate what those additional needs will look like.

3. Expect a “U-shaped” retirement. Many new retirees see an ebb and flow in expenses, often in the form of a “U-shaped” financial picture. When many of our clients first enter into retirement, expenses frequently aren’t very much different from what they were immediately prior to retirement. However, as the new lifestyle becomes routine and people settle into their new patterns, we often see expenses drop for a period of time. This is then followed for many retirees by another upswing as medical and health care costs can drive expenditures back up. So, don’t spend in mid-retirement thinking your expenses will always remain steady. Preparing for potential changes in cash needs now could make things much easier down the road.

4. Plan to live long. Related to the above point, we also encourage clients to plan for a LONG retirement. Life expectancy in the United States has crept steadily up for decades, with the average lifespan sitting at just under 80 years of age in recent years. Planning for a long life will reduce stress not only on you as your retirement years unfold, but also on your children who might be obligated to pick up the financial burden if your retirement funds fall short.

5. Maximize efficiency of income sources. Work with your financial planning team to be sure that all of your potential income streams, such as pensions, Social Security and passive income, are properly utilized and fully taken advantage of. Sound planning in these areas can result in much higher lifetime benefits and favorable tax treatment. We can help answer any questions you have about these income sources, and can help make sure you’re getting everything you’re entitled to.

Even if retirement is still a decade away for you and/or your spouse, taking a few steps to get prepared today as a pre-retiree could significantly reduce your stress and increase your financial confidence as a retiree. Also, remember: if any of your friends, family members or colleague are drawing near to retirement and have unanswered questions, let us know so we can help them with a pre-retirement checklist as well.

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