The Ultimate Retirement Checklist

In today's newsletter, we're diving into the third installment of our Ultimate Retirement Checklist series.

This is all about the "full retirement" years which is normally between ages 65 and 70 but can certainly vary.

I also frequently refer to this period as your "transition" years because even though you've retired, several important decisions still need to be made.

In my experience, this is the most important planning stage because mistakes made here are very difficult to fix.

Medicare planning

Medicare, or healthcare planning in general, is a critical milestone.

Missing enrollment windows can lead to lifelong penalties or unexpected out of pocket costs.

I usually recommend that our clients evaluate their options well before their 65th birthday to ensure a smooth transition from private or employer insurance.

That way when you arrive at this age, you're ready to implement it with confidence.

On a more positive note, for many people transitioning from private health insurance to Medicare tends to result in cost savings.

Social Security and tax planning

This is the time to hone in on your Social Security claiming strategy and decide exactly when you would like to start your benefits.

However, the timing is just one piece of the puzzle.

You also need to understand how your Social Security claiming decision interacts with your broader tax and income picture.

Claiming early might provide immediate cash flow, but waiting can significantly increase your monthly benefit and provide a larger survivor benefit for a spouse.

The way I see it, making your Social Security decision without taking into consideration your overall retirement plan is a big mistake.

Just to give you an example, if you take your Social Security benefits too early, it can impact your Roth conversion strategy and you would potentially overpay your taxes.

Assess your living arrangement

Many of our clients at least consider reevaluating their living arrangements at this stage.

Does it still make sense for you to live in a 3-story condo or a multi-level single family home?

Many find that the family home, while full of memories, is no longer practical or cost effective.

Downsizing can not only help improve your overall financial condition but also move you to a better location for your new lifestyle.

Keep in mind, as I mentioned in one of our latest webinars, moving without understanding the tax consequences can be a big mistake.

Click HERE to watch the webinar recording where I focus on “Home Transitions in Retirement and What You Need to Know Before You Move”.

Re-evaluating longevity and portfolio growth

If needed, I also encourage you to reassess your plan based on updated longevity assumptions.

Modern healthcare continues to extend life expectancy.

For our clients, most of the plans we develop are at least until age 95.

So your financial plan must account for the possibility of a 30 or even 40-year retirement.

This requires maintaining sufficient growth funds in your portfolio to offset the eroding effects of inflation.

I truly believe that it's a big mistake to simply say that because someone is older they automatically need to invest more conservatively.

You really need to understand the context and, as I mentioned earlier, the fact that your plan and investments need to last for 30 or even more years at this stage.

Planning ahead for RMDs

Managing your accounts wisely can really help you reduce your Required Minimum Distributions (RMDs) and taxes in retirement.

For our new clients, I consistently notice a surprised look on their face when they realized what their RMD is going to be and how much they will have to pay in taxes.

One strategy to consider is a multi-year Roth conversion.

This is not a magic bullet, but converting some pre-tax funds into a Roth IRA during low tax years can be very effective for some people.

By converting now, you essentially pay taxes at today's rates and reduce the size of your future taxable distributions.

This approach also creates more flexibility in your later years and provides a more tax efficient legacy for your heirs.

Keep in mind that taking some funds out of your retirement account prior to age 73 can also be effective depending on your tax situation. So you don't have to wait even if Roth conversions are not the right choice for you.

A fair word of warning. Roth conversion analysis is a complex task and you would want to work with a good financial planner or CPA to implement it.

Stay vigilant

Finally, staying vigilant against fraud and identity theft is a very important part of the checklist.

Unfortunately, seniors are frequently targeted by increasingly sophisticated scams.

Depending on your technical skills, there are many ways to protect yourself against ever-increasing fraudsters and scammers.

Protecting your wealth is just as important as growing it!

And as a good rule of thumb, never click on links in emails or texts from unknown senders.

If you're ever unsure if something is real or not, call the company directly through the phone number on their website to get it sorted out.

In summary

The "full retirement" or "transition" stage of your plan is likely the most important one.

It's full of potential mistakes or opportunities to make yourself even more comfortable in retirement.

So please make sure that you spend adequate time at this important stage of your retirement.

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