2/22/2013 1:30 AM ET|
Nearing retirement? 5 must-do tasks
It's time to gather the information you'll need to make sure you're financially prepared for the transition. Here's what you need to know.
Are you within a few years of retirement? It's time to get your financial house in order. Here are five items to take care of now.
Take a look at all of your company benefits. Your 401k might be your biggest benefit, but there may be others. Can you continue medical or other insurance? Are there other benefits that you can continue at reduced group rates? In the case of your 401k, you need to decide if you want to leave it with your soon-to-be-former employer, roll it into an individual retirement account or take a distribution. The last choice will likely result in a hefty tax bill, so this is not a good idea for most folks. Do you have company stock options that you haven't exercised? Check the rules. Speaking of company stock, there are special rules called net unrealized appreciation to consider when dealing with company stock held in your 401k.
Take a look at any pensions from current or former employers. Depending upon the rules of the plan, you may have several decisions to make with regard to your pension benefit, if you have one. Do you take the benefit immediately upon retirement or wait? This will depend upon the plan rules and your need for the money. In some plans the benefit may be greater if you wait until age 65.
Additionally, some plans allow you the choice of taking an annuitized lifetime benefit (a monthly check) or taking a lump-sum payout. This decision should be made in the context of your overall financial situation and your ability to effectively manage a lump sum. Also, as this lump sum would be taxable, it is generally advisable for you to roll it over into a tax-deferred account such as an IRA. Lastly, if you have earned a pension benefit from a former employer, be sure to contact your old company to get all of the details and to make sure it has your current address and contact information.
Determine your Social Security benefits. The main decision is when to start taking your benefit. While you can start at age 62, there is a significant reduction versus waiting until your full retirement age. Further, if you wait until after full retirement age, your benefit will increase until age 70. If you are married the planning should involve both spouses' benefits. There are a number of sophisticated strategies surrounding couples and whose benefits to take when, so planning can pay off for you here.
Take stock of all of your retirement financial resources. Many pre-retirees suffer from financial clutter. They have several old retirement plans from previous employers in IRAs or still in an account in the old plan. The same may be true of a spouse. They each have a 401k with their current employers. There might be IRAs, a variable annuity, taxable investments, stocks, bonds, mutual funds, etc. There is a lot of financial "stuff," but it isn't organized into a coherent portfolio. It is vital that you take the steps to consolidate accounts and to get a handle on what you have and how and where it is invested.
Determine how much you will need from all sources to support your retirement lifestyle and compare this with your projected retirement income. While this might seem intuitive you'd be surprised how many people within a few years of retirement haven't done it. Specifically, look at your Social Security benefit, any pension payments, any part-time income from work, consulting, etc. Compare these with the amount that you project that 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 needs or possibly plan on working a bit longer.
This is a very cursory checklist for pre-retirees. This might be a good point to engage the services of a fee-only financial advisor if you've never done a financial plan, or if your plan is out of date. Retirement can be a great stage of life, and proper planning can help ensure your success.
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Yea, for an article titled "...5 must-do tasks" - it was pretty lame. My list:
1) get as close to debt-free as you can.
2) as much as possible, max out retirement funds; including the post 50 catch up.
3) tell kids - as politely as possible - "We're retiring; you're on your own."
4) look at possible part-time opportunities - you might need some extra cash.
5) if not already doing so, start exercising and eating healthy - enjoy your retirement years
I'm sure others can add to this list.
Number one: There are no company benefits. The company I worked for for years went bankrupt and a 58-year-old person can't buy a job. Number two: There are no pensions from current or former employers. Number three: Believe me, I have my potential Social Security benefits memorized. Number four: I am fully aware of my retirement financial resources down to the penny. Number five: I know my lifestyle, I know my resources, and I know how long they will last. Number six: I have never, and will never, trust or rely on ANY retirement advice from MSN Money. Only the terminally stupid wouldn't already know EVERYTHING that MSN Money pukes out about retirement. The ONLY thing about MSN Money retirement advice that is not obvious and that is consistent is their constant pushing to never take Social Security at 62 and to wait until full-retirement age or even until 70 to take Social Security. I guarantee you that is not going to happen.
1. Find a nice calm lake.
2. Buy a fishing boat.
3. Fish out of the boat until the beer runs out.
4.Start over again tomorrow.
My advice? Pay off everything before you retire. Have a nest egg..401(k), savings, whatever. Try to find something that will generate a small income during retirement. You'll be fine.
1. Saved starting early - check
2. Saved a material and ever increasing amount of my income - check
3. Saved an emergency fund - check
4. Saved an additional already taxed amount for tax planning - check
...know where each amount above is - check
5. Maintain life, health and property insurance - check
6. Carry no revolving debt - check
7. Paid off mortgage - check
8. Save monthly what would have been the house payment - in process
...let it all simmer and tenderize for 9-12 years (10 is the goal)
9. Breathe deep, work my last day - and let the stress and tension melt away
10. Wake without an alarm...brew and enjoy my first hot steaming cup of coffee while watching birds going about their busy morning activities. Listen to the distant echo of a puttering motor attached to small boat crossing the lake. Grab some night crawlers from the fridge, drop anchor, and give the owner of that puttering boat a run for his money...the lawn, my new boss these days, can wait.
Looking forward to it..
Must do tasks:
1-decide what you want
2-pay off all debt as much as possible (may mean tightening your belt)
3-replace all major appliances if going to stay in residence
4-get a really good car/truck, etc
5-stash some cash for emergencies
6-to quote CTRobot "tell kids-you are on your own."
7-accept the fact that your lifestyle is going to change-
8-Don't worry-be happy
We have no guarantees that we will live to 95 or whatever age they're predicting now.
Just be prepared to live a little closer to the belt when U retire, unless U have saved a great
deal for many years. If U don't...the Gov't will just keep enjoying it for themselves, and crying the blues how broke the system is.
Even if U have saved...that's another legal ripoff. The Gov't re-taxes U on all the money U already paid taxes on, when U take it out of your 401K or IRA. It's a total bonzer of a ripoff !!
I'm beginning to think it isn't worth paying everything off or not buying something U want anymore.
I have a friend who has never saved a nickel, has spent to the point of bankruptcy and just collects her SSD, and lives just fine on it. And of course...she is still charging up a storm wherever she can.
Why not ? She got out of paying it off b-4, so why not again ? That's her attitude anyway.
There are enough helpful programs out there to help U get by & live fairly good if U don't insist on owning a huge home after retirement. U can invest in an adult condo and live very easily. Or if your lucky enuff to have a paid off mtg., that helps too. But if your property taxes are killing U like mine do, just dump the house and rent in a senior place. Why suffer ?
Go take all those vacations U didn't take becoz U were saving all those years. Get that new car. Or just hire someone to drive U around. It's time for us to spend, spend, spend !!!
side note: I don't do this...but I wish I could. I'm one of those responsible, saving type individuals.
I just hope it lasts long enuff and is enuff for the time I'm alive for me to use up and not run out of.
(I think it is...if the market doesn't crash b-4 then)
If I don't spend it....my kids will get all of it without the benefit of saving up themselves.
Do I really wanna do this ? Or do I want to enjoy what I have scrimped to save up all of my life ?
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