Looking 5 Years Ahead: A Pre-Retirement Checklist

Retirement is an exciting life transition—so much so, that you may already be dreaming of all the things you will do when your time is finally your own. But if you are within five years of retiring, then job one should be determining how you will pay for them.

No matter how confident you are that you are on solid financial ground, fiscal advisors lay out a five-step, pre-retirement checklist:

Determine Your Goals – What are your primary objectives? To maintain your current lifestyle throughout your retirement years? To be certain you will not outlive your resources? To add to your discretionary spending or provide for family members down the line? List what is most important.
Look at Your Current Spending – To do that, check your income on last year’s tax return. Subtract the taxes you paid. Note what you paid toward debt. Compare your current bank balance with the same time a year ago. Example: If you made $100,000, paid $20,000 in taxes, increased your bank balance by $5,000 and decreased debt by $5,000, then you spent about $70,000 last year.
See Where You Stand – Will your retirement funds cover this approximate spend? List all expected income sources including Social Security, pensions, retirement accounts and health savings accounts, real estate, annuities, stock options, etc.
Look at Health Care and Long–Term Care Needs – Will you be fully covered by Medicare or company sponsored health care? What about prescriptions? And will your resources, your family or Medicaid pay for long-term care if you need it?
Create a Budget – Now it’s time to create a budget. If there’s a shortfall, how will you fill the gap? You may decide to reconsider when you will start drawing Social Security – if you will delay retirement, save like crazy now, cut back on current and/or retirement expenses, take on a part-time job.
For many people, there will be variables—inheritances, for example, which could pad your resources, stocks or other assets that may increase or decrease in value. But taking these pre-retirement steps now can give you a snapshot of where you stand.

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