Your Pre-retirement Checklist

Retirement is a major life event that requires a lot of pre-planning. This list of 10 planning tasks will get you started on the road to a smooth retirement transition.

by NEA Member Benefits

Key takeaways

  • Know where your retirement income will come from, including pension, savings and other benefits.
  • The earlier you start planning your retirement, the easier the transition will be.
  • “Practice” retirement by gradually changing your lifestyle to match your future expectations.

Dreaming about retiring? Check your savings first

Before you start making travel plans and filling up your retirement social calendar, take stock of your savings. Hopefully, you’ve been socking away some of your monthly income in one or more tax-advantaged retirement plans, like a 403(b), 401(k) or IRA, to help supplement your pension benefits.

How do you know if you’re saving enough? Retirement income needs vary a lot depending on the lifestyle you want to live and the pension benefits you can expect. It also depends on the age you retire. For some people, retiring early is important, and they are willing to work harder, forgo some discretionary spending and plan carefully in order to do so.

The financial experts at J.P. Morgan Asset Management have come up with a general guideline you can use to see if you have a nest egg big enough to potentially last through a 30-year retirement.

It’s based on a multiple of your income at various ages. For example, if you’re currently age 45 and earning $50,000 a year, it’s suggested to have 3.5 times that figure saved in retirement accounts. These are just broad targets, so don’t worry if you aren’t close to the suggested numbers. A comfortable and fulfilling retirement takes more than just dollars in the bank. The full table can be found here.

10 tasks to check off before you retire

  1. Create a retirement budget. A budget always includes income and outflow, so know your income stream. This includes Social Security, pension and survivor benefits, and their payout options. Map out your expenses and realistically adjust your lifestyle, if necessary. Some experts suggest “practicing” this new lifestyle before actually retiring. Determine how much you will need to withdraw from your retirement savings each year. The Fidelity mutual fund group suggests that you aim to withdraw no more than 4% of your account value annually. For a little more income certainty, some people are attracted to the security of an annuity, which can provide a guaranteed monthly income regardless of how long you live. Consumer advocates caution that these products can be expensive, so do your research before you buy.

  2. Pay attention to health care needs. Determine what employer-sponsored health benefits you might have, and familiarize yourself with Medicare. If you plan to retire before Medicare eligibility at age 65, figure out how you will cover the gap. Take advantage of your NEA benefits and learn how the NEA Retiree Health Program can help. 

  3. Get your debts under control. Some experts recommend paying off your mortgage before retirement, to reduce living expenses. Others say that building a cash emergency fund (see #6 below) is more important. One compromise is to set up a home equity line of credit (HELOC) so that you will have a potentially tax-deductible way of borrowing for necessary expenses. If you want to refinance a mortgage or get a HELOC, it’s much better to do it while you still have a salary. Aside from large debts like your mortgage, pay off as many smaller debts as you can and avoid racking up any new debt.

  4. Review your insurance. If your mortgage is paid off and the kids are grown and well-established in their own careers, you may no longer need life insurance. On the other hand, with life spans increasing, it’s more important than ever to have long-term care insurance. Convert any group insurance plans to individual coverage, if possible. Car insurance may be cheaper once you’re no longer driving to work every day.

  5. Adjust your asset allocation. Consider shifting your assets away from higher-risk securities such as stocks and toward more stable investments like bonds in your retirement plans and other investment portfolios. You may not be able to wait out another downturn in the stock market.

  6. Create a cash cushion. Keep a cash reserve to cover short-term expenses or emergencies that may arise during the transition to retirement and afterward. This can help keep you from running up new debts.

  7. Simplify and automate. Set up automatic deposits of your Social Security and retirement account payouts into your bank account, and create automatic bill payments for items such as insurance premiums to make sure you keep your coverages in force.

  8. Make an activity plan. List all the things you ever thought you’d want to do in retirement. Set goals for yourself. Make sure your plans are in line with your post-retirement income. Your district might offer pre-retirement counseling or seminars to help prepare you for the potential emotional impact of retiring.

  9. Plan the actual transition carefully. Find out what dates are good to retire to maximize benefits and how much notice your employer requires. Use any accumulated time off that you would otherwise lose. Take advantage of other benefits you may lose with retirement—for instance, get new glasses if you will lose vision coverage. If you are planning to move, consider the best times for selling your house. File all the necessary paperwork for Social Security, Medicare and other benefits.

  10. Throw a retirement party. Be sure you have contact information for people you want to stay in touch with. Change your own contact information for bank accounts and other business relations from any work-related email addresses or phone numbers.

We can help you plan the retirement you deserve