5 Critical Steps to Take Leading Up to Retirement

Retirement planning isn't something that happens overnight. The decisions you make in the years leading up to retirement can significantly impact your financial security and tax burden for decades to come. As we work with clients approaching this important life transition, we consistently see the same opportunities that make the biggest difference.

The people we see worry most about money are seniors in retirement.  Why?

• Because they likely can’t physically go back to work at their age
• Their skillset could be obsolete
• They don’t want to be financially dependent on their children or the government
• Seniors value their independence the most

Here are five essential steps to consider while you're still in your earning years:

1. Track Your Spending

- This is the biggest mistake we see retirees and pre-retirees make

- It’s not knowing what your spending/lifestyle is

- Everyone has a totally different lifestyle/assets/liabilities/income/expenses/wants/needs/etc.

- The starting point of a great financial plan is knowing how much you spend

2. Gather a List of Your Assets/Liabilities

- It’s quite important to know what assets you have and what you owe in retirement

- You should now what assets are income producing / growing (brokerage accounts/IRAs/etc.) and which ones are costing you (homes/cars/etc.)

- You should know what liabilities/debts you should tackle leading up to retirement to put yourself in a better financial position

3. Know Your Projected Social Security Benefits

- You can find your projected Social Security benefits directly on ssa.gov

- Social Security benefits have increased quite a bit for people currently retiring or retiring in the next five to ten years

- Some benefits could be close to $5k/month depending on how long the person delayed their benefit!!!!

- Social Security planning is incredibly important when two spouses are involved to make sure they are each protected if one spouse passes away

4. Estimate Your Income Sourced in Retirement

- This is where you need a good financial planner/tax expert

- It’s incredibly important to know what money to pull from where to get the most tax efficient distributions of your assets that you can

- There IS NOT a one size fits all solution to this

- Everyone’s goals and financial picture is different

- You should know sources are tax free, tax efficient, and taxable to help you make an informed decision.

5. Put Together a Comprehensive Financial Plan

- The whole idea here is to make smart money decisions when you know all of the answers

- This is what a good financial plan does

- It helps YOU make the decision

- It shouldn’t be to sell you a certain product or service

- This plan should cover the following:

• Financial Independence Goal
  • What number do you need to hit to be financially independent?
• Retirement Cash Flow Planning
  • Where do you get the income you need to live off of in the most tax efficient way possible?
• Investment Planning
  • What is the best asset allocation that makes sense for my needs?
• Tax Planning
  • How do I save on taxes in a way that’s consistent with my financial/life goals?
• Risk Management
  • What insurances do I need to protect what I have?
• Estate Planning
  • What do I want to see happen with my money when I’m alive?
  • What do I want to pass on to the next generation?
  • Am I charitably inclined?

The Bottom Line

These strategies work best when implemented thoughtfully and in coordination with your overall financial plan. Tax laws are complex and constantly changing, and what works for one person may not be optimal for another based on their unique circumstances.

If you'd like to discuss how these strategies might apply to your specific situation, we'd be happy to schedule a complimentary, no obligation, meeting to review your retirement readiness.