Blue Bell Private Wealth Management

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Your Pre-retirement Checklist

Alex LaRosa

Investment Advisor Representative

January 24, 2020

Your Pre-retirement Checklist

Here are some steps you can take to prepare for retirement whether you are 10 years away, 1 year away, or even six months away.

5-10 Years away

  • Accelerate Savings-In 2020, you can contribute up to $19,500 to a 401(k), 403(b), 457(b), or the federal government’s thrift savings plan, plus an additional $6,000 in catch-up contributions if you’re 50 or older. And the annual contribution limit for traditional and Roth IRAs is $6,000 in 2019, plus an extra $1,000 if you’re 50 or older.
  • Review your Investment Strategy-Increased longevity and inflation risk mean that retirees need to take more risk than they think of going into retirement. The goal should be for long-term growth for assets to last over a 30-year retirement with 3% annual inflation.
  • Pay off debts-particularly credit cards and car loans, before you retire. The latest data from the Employee Benefit Research Institute show that in 2016, households approaching and in retirement carried an average of about $76,700 in debt, mostly housing debt. Total debt as a percentage of assets was 6.5%.
  • Build an emergency fund-To cover at least 3-6 months of your current expenses. This should be in cash or other short-term instruments.
  • Consult a Financial Advisor- Even if you have been managing your money for years, you may need financial help now. Here are 5 questions to ask an advisor when consulting with them.

1-2 Years Away

  • Consider working a little longer-Earning $20,000 a year at a part-time job is the equivalent of drawing income from an extra $500,000 in retirement savings. Even if you don’t need the money, you might want to just keep busy.
  • Weigh your Social Security Options-You’re eligible to start your Social Security benefits when you turn 62, but if you do, your monthly check will be reduced for the rest of your life. You may have little choice if you are out of work or in poor health and need the money to pay expenses. But if you have the wherewithal to work a few more years or have other sources of income, delaying checks until at least age 66 will increase your monthly benefits by 33% or more.

Six Months Away or Less

  • Do a benefits check with HR– Before you head out the door, it pays to squeeze a few extra bennies from your boss. Companies use various time tables to match employee 401(k) contributions and dole out profit-sharing. Don’t leave before the last check has been written. Your retirement plan’s summary plan description, provided by your employer once a year, will clue you into the key dates. Also, find out the rules for cashing out paid leave. If unused leave expires at the end of the year, you might decide to retire before the holidays rather than in January.
  • Apply for your pension-Five months before you retire, ask your company’s human resources office for an application and a statement that shows your benefit calculation and payout options. You may have to decide between a lump-sum payout and an annuity.
  • Position your retirement stash-To preserve the pretax status of your savings, you can generally leave the money in your 401(k) or roll it into an IRA. The IRA usually gives you more investment freedom and flexibility for withdrawals.
  • Sign up for Medicare- Generally, you should enroll in Medicare Part A, which covers hospitalization costs, when you reach age 65. The initial enrollment period for Medicare Part B, which covers doctors’ visits, runs for seven months, starting three months before your birthday month and continuing for three months afterward. If you miss the Part B enrollment period, you could incur a 10% penalty for each year you delay beyond your initial enrollment period.

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Your Pre-retirement Checklist

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