All-in-One Retirement Checklist

Behind every happy retirement lies a lot of planning and hard work. And while retirement planning can be complicated, it's less daunting if you break it up into a series of steps over time. That's where this easy-to-use retirement checklist comes in:  It can help you focus on the key decisions you need to make at each stage in the process.

Retirement planning — right now 

  • Create a savings and investment plan. The sooner you start, the better. Decide on an appropriate portfolio asset allocation you can live with over the long haul, no matter what the market does in the short term. Set reasonable investment return expectations and allow room for some year-to-year volatility in your long-term planning and projections—don't assume a constant annual rate of return from year to year.
  • Set aggressive savings goals. If you're in your twenties, for example, try to set a savings floor of at least 10-15% of your pre-tax income. That percentage goes much higher the longer you wait to start saving. Take advantage of available employer plans, especially if there's a matching contribution. Put extra savings into a deductible traditional IRA or Roth IRA, if you're eligible. If you can save even more after that, put the excess into your taxable brokerage account.
  • Assess your current lifestyle. Living below your means now has a twofold benefit: You're saving more, and you can set a smaller retirement portfolio goal because you won't have to support an extravagant lifestyle. On the other hand, living beyond your means carries a double whammy—not only are you strapped for cash now, but you become addicted to a lifestyle you won't be able to support in retirement.
  • Revisit your retirement plan annually. Don't just monitor your portfolio's investment performance—also monitor your ability and willingness to save.

Ten years until retirement

  • Start thinking in detail about when, where, what and how muchwhen you want to retire, where you would like to live, and what you want to do. The answers to these questions will help you to figure out how much all of it will cost. Assume you'll want to at least maintain your pre-retirement lifestyle, then shoot for a portfolio that's roughly 25 times your estimated first-year spending minus other sources of income. If you're thinking of moving, be sure to consider such factors as local taxes, housing and living costs, health care resources, part-time employment and/or volunteer opportunities, and other community amenities, such as recreational facilities and social clubs.

How Much Do You Need to Retire? Think 25 Times Your First-Year Withdrawal

Total first-year spending

$90,000

Less Social Security income

(25,000)

Less other income

(15,000)

First-year withdrawal amount

$50,000

 

       x25

Retirement portfolio target

$1,250,000

  • Share your retirement dreams with your spouse. You may be dreaming of fly-fishing right next to your retirement home in the mountains every morning while your significant other is thinking about a downtown, high-rise luxury condo.
  • Reduce your borrowing. Pay down all high-cost, non-deductible debt. Consider whether it makes sense to accelerate your mortgage payoff.
  • Review your Social Security benefits. Have an idea of what you can expect, and be sure your record is up to date. You can estimate your Social Security benefits online.  Also, see When Should You Take Social Security?
  • Think about long-term care insurance. If it makes sense for you, don't wait too long to lock in lower premiums.
  • Increase your savings. As your salary increases, so should your retirement contributions. Max out on tax-advantaged retirement accounts and take advantage of catch-up provisions. If you can, consider saving more in taxable accounts.

Five years until retirement

  • Continue to refine the "when, where, what and how much" of your retirement plan. Create a retirement cash flow budget. Determining how much cash your portfolio will generate in retirement income can help you determine how much cash you will need from other sources.
  • Investigate retirement health care insurance options. Medicare won't cover everything. Check out supplemental insurance early.
  • Revisit your asset allocation and start thinking about a portfolio withdrawal strategy that incorporates all income sources and won't deplete your portfolio prematurely. For help with which investments to sell in retirement, when to sell them, and from which accounts—taxable or tax-deferred —see Generating Cash Flow from Your Retirement Portfolio.
  • If you're not on track, be realistic about your options.  You can save more now, postpone retirement, or make adjustments in your post-retirement life, such as spending less or working part-time.

Two years until retirement

  • Fine-tune your retirement budget. List sources of income and expenses in as much detail as possible. Separate expenses into two categories—discretionary and non-discretionary.
  • Review your asset allocation and further refine your withdrawal strategy. Managing your portfolio for sustainable cash flow during your lifetime can be complex. Sit down with your investment and tax professionals if you need help.
  • Create a "short list" of desired retirement locations and then plan a tour. Visit in both summer and winter so that you know what it's like to live there during different times of the year.

Last 12 months

  • Finalize your cash flow budget and your strategy for how you will take cash out of your portfolio.
  • Get up-to-date quotes for health insurance and find out how it works with Medicare (including prescription drug coverage).
  • Review any existing insurance policies, including life, property, casualty and liability insurance, to be sure you're not paying too much for the wrong kind of coverage.
  • Check up on your Social Security benefits. You should plan on filing for Social Security three months before you expect to receive your first check.  You'll need to sign up for Medicare three months before your 65th birthday if you're not already receiving Social Security by then.
  • Give notice to your employer at the appropriate time. Ask about what you need to do to trigger any benefits you're entitled to, including arrangements for direct rollover of your retirement account balances to your IRA.
  • Consider consolidating accounts to help simplify your financial life going forward.

In retirement

  • Review your budget annually and combine cash flow planning with portfolio rebalancing. It's a good idea to set aside the cash you'll need for the next 12 months by removing it from your portfolio. In addition to interest and dividends, you could generate any additional cash you'll need as you rebalance by selling those asset classes that have appreciated the most (or depreciated the least, as the case may be). Keep at least another two to four years of withdrawals in short or ultra-short fixed income investments as part of your portfolio allocation. See Write Your Own Retirement Check for more details.
  • As age 70½ approaches, don't forget you'll need to start taking required minimum distributions from your traditional IRA. You have until April 1 of the following year to start, but that means taking two distributions in the first year.
  • Continue to monitor your investment performance and, in addition to rebalancing annually, think about periodically shifting your strategic asset allocation as time goes by. For example, you might start out with a moderate allocation of 60% stocks, 35% bonds and 5% cash in your sixties, shift to a moderately conservative allocation (40/50/10) during your seventies, and then shift to a conservative allocation for your eighties and beyond (20/50/30).
  • Be sure to stay well diversified within each asset class as well—that means reducing exposure to any single investment, such as the stock of your ex-employer.
  • Periodically review all the categories of your insurance coverage.
  • Be sure your estate and gifting plan, account titling and beneficiary designations are up to date.

Finally, don't forget to enjoy the best time of your life. You've earned it! Check off your milestones as you reach them, and talk to a Schwab consultant for help along the way.

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