20 Things to Do Before You Retire in the 2020s

Key Points – 20 Things to Do Before your Retire in the 2020s

Reviewing 20 things to do before you retire in the 2020s
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20 Things to Do Before You Retire in the 2020s

Are you planning to retire in the 2020s? We’re obviously closing in on being a year away from the halfway point of the decade. Let’s review some things to consider if you’re planning to retire in 2020s to hopefully help give you more confidence in your ability to get to and through retirement.

20. Determining What You’re Retiring to

It’s sometimes easy for people to focus on what they’re retiring from during the retirement planning process, especially if they don’t love their job. We think of retirement from a different perspective at Modern Wealth. Instead of thinking about what you’re retiring from, what are you retiring to?

A common theme throughout this article on things to do before you retire in the 2020s is forward-looking planning. Take a step into the future and think about what your life will look like in retirement. We’ve heard people compare retirement to a permanent vacation. You can’t just assume that retirement is going to feel like a permanent vacation, though. You need to plan for it!

Let’s say it takes 10 months (40 weeks) to plan a two-week vacation, and you want to prepare for a 30-year retirement. Using that same 20:1 metric, you should be planning for retirement for 600 years. That’s unrealistic, but it illustrates the point that people can overlook how much time it takes to plan for retirement.

19. Prepare for a Change in Lifestyle

Let’s say that you started your career 35 years ago at age 22 and you’re planning to retire in the 2020s. Think about how much time you’ve spent working during your career compared to how much time you’ve spent with your family. Would you say that your job is a big part of your identity? How will you define yourself once you’re no longer working?

Planning for retirement doesn’t just involve saving for it. After all, you won’t know how much you need to save for retirement without knowing what you’re going to do in retirement. What are your goals for retirement? Are there things you want to learn or places you want to go?

Knowing what you want to do in retirement seems easy, but when you try and put it all together and plan for all those expenses, it can get pretty hairy, pretty quickly. Other things to consider are large purchases or donations, such as paying for a grandchild’s college, when you’re going to need new cars, or purchasing a vacation home. Maybe you want to learn woodworking or start a scholarship at your alma mater.

Whatever you want to achieve in retirement, write it down. Knowing your goals and writing them down can help you focus on developing a successful retirement. Another reason for writing down all your goals for retirement is it can be an extremely helpful tool when you are discussing retirement with a financial advisor and other wealth management professionals. That brings us to our next thing to do before you retire in the 2020s…

18. Be the CEO of Your Retirement

Consider hiring a team of wealth management professionals to assist you with coordinating your financial and life goals. Some people take the DIY approach to retirement planning and rely on retirement calculators to figure out how much to save for retirement. However, there are so many things that retirement calculators don’t account for, such as:

Insurance
Future tax rates
Debt modules and calculators
Medical expenses
Social Security
Inflation
Required Minimum Distributions
Your asset allocation and potential returns
Your personal goals for retirement

Think about this. If you break a bone or are dealing with a major illness, hopefully you will consult a doctor (or team of medical professionals) instead of trying to heal on your own. The same thing applies if you’re having car trouble. Even if you’re knowledgeable about cars, wouldn’t you feel better about seeking a second opinion from a mechanic?

Who Is on Your Financial Planning Team?

That’s not to say that you should hire a financial advisor and then take a set-it-and-forget-it approach with your finances. That can potentially be very problematic, especially if you hire someone who ends up being more of a financial product salesperson rather than a financial planner.

We encourage you (and your significant other if you’re in a relationship) to be the CEO of your retirement. At Modern Wealth, we have the four C’s—CFP® Professionals, CPAs, CFAs, and a company retirement plan team—that are pivotal to our team. We also have estate planning and insurance specialists that play important roles in the financial planning process. However, none of our wealth management professionals can effectively do their jobs without knowing the needs, wants, and wishes from the fifth and most important C—the client.

As the CEO of your retirement, you’re calling all the shots. Our financial planners are also Accredited Investment Fiduciaries®, which means they’re required to put your interests ahead of their own. Finding a team of wealth management professionals that you can trust is not a task to take lightly. We will let you know if and how we may be able to add value to your retirement by building you a comprehensive financial plan that’s tailored to your goals.

17. Applying Different Rates of Inflation to Different Things

If you’ve already started planning for retirement, that’s wonderful! As we continue to review things to do before you retire in the 2020s, let’s revisit the list of items that we shared that many retirement calculators don’t account for. One thing on that list that wasn’t top of mind for many different at the beginning of the decade was inflation.

The average annual inflation rate in 2020 was 1.2%, but it climbed up to 8% in 2022.₁ When we’re building financial plans, we’re not factoring in a 1% or 2% annual inflation rate. We’ll typically inflate the cost of general expenses by roughly 4% each year. Yes, that might be conservative for most years, but you need to stress test your plan against high inflationary environments like we had in 2022. That is also one of the 30 checklist items on our Retirement Plan Checklist, which also includes age-and date-based retirement planning considerations. Download your copy below.

Download: Retirement Plan Checklist

Also, there are expenses such as healthcare costs that typically inflate at a higher rate than consumer goods and services.₂ So, we’ll typically inflate healthcare expenses at around 6.5% each year. Make sure you’re inflating different expenses at different rates before you retire in the 2020s (or later).

16. Create a Long-Term Tax Strategy

Inflation and healthcare costs are two of the biggest wealth-eroding factors in retirement. Taxes fit in that category as well. We’ve met with many prospective clients that believe that they’ll be in the same tax bracket or a lower tax bracket in retirement. That’s not a safe assumption to make, though, especially if the tax rates within the Tax Cuts and Jobs Act sunset as scheduled after 2025. Unless Congress steps in, tax rates will revert to the pre-TCJA levels rates of 2017, which are higher than today’s rates.

Taxes in retirement are more complicated than while you’re in your earning years. Your retirement income is often located in different types of accounts, all of which have different tax implications. This isn’t necessarily a bad thing, but you need to understand how to utilize these accounts in a tax-efficient manner.

Tax diversification and asset location are only part of the puzzle. Understanding how Social Security can affect your taxes is also an essential factor. You might say, “But Social Security is tax-free, right?!” Not always. It’s possible for up to 85% of your Social Security benefits to be taxable.

There are also considerations to analyze like Required Minimum Distributions (RMDs), which we will discuss a bit later as well.

The goal of forward-looking tax planning is to save money on taxes over the years rather than looking at each year in a vacuum. If you want to learn more about how different types of accounts can affect your tax bill and other tax-related discussions, download our Tax Reduction Strategies and Roth Conversion Case Studies white papers.

Download: Tax Reduction Strategies

Download: Roth Conversion Case Studies

15. Determine Your Social Security Claiming Strategy

This is a crucial part of a properly constructed retirement plan. You’re eligible to begin claiming Social Security benefits at age 62, but that doesn’t mean you should claim them then. It’s important to remember that the longer you delay claiming your Social Security benefits, the bigger your benefits will be.

Also, keep in mind that the decision of when to claim Social Security isn’t just about you if you’re married. When you or your spouse dies, the surviving spouse will get to keep the higher of your two benefits. The smaller benefit goes away. That’s important to understand before you retire in the 2020s (or later).

14. Know Where Your Retirement Income Will Come From

It may seem obvious, but when you get to retirement, it’s important to know which accounts to draw from and when. Like we discussed earlier, there are tax implications to taking money out of different types of accounts.

If most of your retirement savings are in a traditional 401(k) and IRAs, it’s important to understand that that money has yet to be taxed. Let’s circle back to No. 16 for a moment and keep in mind that we could have higher tax rates beginning in 2026. If you’re not planning to withdraw money from those traditional accounts until after 2025, that money will potentially be taxed at higher rates than what are in place today.

However, if you have money in a Roth 401(k) and Roth IRAs, that money has already been taxed and will come out penalty-free and tax-free. 2025 also presents an opportunity to do Roth conversions at a discount if we do have higher tax rates beginning in 2026. When doing a Roth conversion, you’re converting money from a traditional IRA to a Roth IRA. Those funds will be taxed upon the conversion, but the Roth IRA earnings and distributions will come out tax-free and penalty-free under certain conditions.

It’s important to make sure that you have your assets in the proper types of accounts depending on what stage you’re at in the retirement process or how your plan is structured. You could be a strong candidate for a Roth conversion, and you don’t even know it. It’s also important to understand where your retirement income needs to come from to plan for things like RMDs and Qualified Charitable Distributions (QCDs).

13. Plan Your Withdrawals

This topic is obviously connected to knowing where your income is going to come from in retirement, but planning your withdrawals is essential in retirement, especially when you hit RMD age. The age for RMDs changed on January 1, 2023, once the SECURE Act 2.0 became law. RMD age went up from 72 to 73 and will increase to 75 by 2033.

There are also additional RMD rules for inherited IRAs that went into effect when the SECURE Act became law. Most non-spouse beneficiaries (a.k.a., non-eligible designated beneficiaries) must empty their inherited IRAs by the end of the 10th year following the account owner’s death. Additionally, if the account owner died on or after they were to start RMDs, non-eligible designated beneficiaries are subject to annual RMDs within the 10-year period to empty the account.

So, what happens if you miss an RMD? There can be significant penalties, so it’s crucial to know how much your annual RMDs are and when you must take them. Any RMD amount that isn’t withdrawn on time is subject to a 50% excise tax. That can be reduced to 25% or even 10% if the RMD is paid in full within two years after the due date.

Understanding when to withdrawal is just as important as knowing where to save. Which takes us to our next thing to do before you retire in the 2020s…

12. Understand Your Portfolio

Understanding why your investments are allocated the way they are is a highly important factor in a retirement plan. You need to know how your investments are allocated and how they work for you in different market cycles. This allows you to understand your level of risk and protection in a market downturn, bear market, or recession.

If your financial planner doesn’t illustrate and explain how and why your investments are allocated, this should be a red flag. You need to know the reasoning behind your investments and how those allocations align with your retirement goals. If not, you might be opening yourself up to undue risk.

Speaking of risk, let’s talk about our next thing to do before you retire in the 2020s…

11. Make Sure You’re Properly Covered

Risk management is more commonly referred to as insurance. No one buys insurance hoping they need to use it. You don’t buy a new car, get updated insurance, and go immediately wreck the vehicle. However, insurance is a primary piece of any solid retirement plan.

You need to know if you are adequately insured on the property and casualty side, but also from a life insurance or long-term care perspective as well. There’s a point where you can be over-insured. Not only is it unnecessary, but it can also cause more damage than protection.

Having a plan in place for health insurance is a crucial component of retirement planning. Some people choose to wait until turning 65 and becoming eligible for Medicare before retiring. But if you want to retire prior to 65 and health insurance is the only thing stopping you, let’s look at some of the health insurance options to consider. Knowing your options for coverage is vital.

10. Understand Medicare & Plan for Rising Health Care Costs

You don’t have to be on Medicare to know it’s complicated and messy to understand. Even just comprehending the Medicare Annual Open Enrollment period can be a task. Luckily, there are experts and resources like Medicare.gov that could help you.

Even if you’re not ready to enroll, chances are if you’re nearing retirement age, you have parents or family members who are Medicare age. With how complex it is, it can be comforting to have someone on your side when you’re learning about Medicare.

Even with Medicare, the cost of health care in the U.S. is continually rising. It’s essential to plan for the rise in these costs. Especially as we age, we become more and more susceptible to the need for medical care. Planning as best you can for these costs before you retire in the 2020s could save you enormous headaches when you retire.

9. Plan Your Legacy

Planning your legacy for your loved ones is more for them than yourself. While we often tell our clients to enjoy their wealth now with their family rather than leave it all to them later, it’s important to know that what is left when you depart, and ensure it goes where you want it to go. Having a proper estate plan not only means knowing your estate is transferred to the appropriate parties, but it means a certain amount of peace-of-mind for your heirs.

We aren’t talking financial peace-of-mind either; we’re talking about having the time to grieve and deal with their loss rather than being stuck in legal minutiae. Give your heirs the gift of focusing on what really matters when you’re gone—each other. Probate court is not a fun time and can be a long, arduous, and expensive experience that can be avoided with a proper estate plan.

Understanding if you need a will or a trust is an important decision. Working with an estate planning attorney to discuss your options and put together a plan is also vital. Not only is it important to plan for your family, but it’s also important to plan with your family. This leads us to our next thing to do to retire in the 2020s…

8. Plan with Your Significant Other

If you’re in a relationship, who monitors your finances more—you or your significant other? Hopefully, you both have equal interest in your finances, but that isn’t typically the case for many couples.

Remember that this is your retirement we’re talking about. It’s important to communicate your life and financial goals to your partner as you’re planning for retirement. When you and your significant other are no longer working, you’ll likely be spending a lot more time together. Not being on the same page about your goals in retirement could have devastating consequences.

Have you been keeping any financial secrets from your significant other or been worried that they are keeping financial secrets from you? That may create a potential rift between you and your partner at a time when it’s pivotal to come together. You may be surprised to learn that divorce rates among couples that are 50 and older have double since 1990 and are projected to triple by 2030. We certainly don’t want anyone reading this to become a part of that trend.

Also, if you pass away before your significant other, will they be OK financially? And vice versa? Again, having an estate plan is important so that your wishes are carried out after you’re gone and that your loved ones will be OK.

If you both understand your plan and are working with a team of professionals that you can trust, you can focus on your loss rather than your finances. And when you’re ready, you can know that you’re in hands that understand what your plans were together and can start to plan where you will go in the future.

7. Plan Your Living Situation

Speaking of where you will go in the future, where will you be living? A common practice after retirement is downsizing a home. It’s a significant thing to plan for in the event you buy or rent a new home and incur new debt.

What if you want to relocate to be with kids and grandkids? Plan for it! The better you plan, the more information you can provide to your financial planner, and they can build it into your retirement.

Also, living situations can change multiple times in retirement. Like in the event mentioned previously, if you were to lose a spouse, maybe you’ll no longer need a full home to live in on your own. Or what if you or your spouse experience a life-changing medical event and need long-term care or live-in care? These are things you need to consider and have addressed in your retirement plan.

6. Pay Down Your Debt

Should you get out of debt before retirement? This is a very common question our financial planners get when they sit down with prospective clients. What is the most tax-efficient order to invest and pay down debts?

This order needs to be adjusted based on each person’s individual goals and risk tolerance, but paying off high-interest debt should be a high priority. That’s an example of bad debt, but there are examples of good debt too, such as having a low interest rate on your mortgage. Make sure you understand the difference between good debt and bad debt before you retire in the 2020s.

5. Save Diligently and Track Your Progress

Save, save, save. If you’ve made it to this far into our countdown of 20 things to do before you retire in the 2020s, we’re guessing that you’re taking retirement seriously. So, it might go without saying that saving is important, but we’re going to say it anyway. Saving is important.

You should always take advantage of any company matches on your 401(k). Diversify your savings vehicles for tax purposes once you’re in retirement. Talk to a trusted financial planner to help you make decisions on traditional versus Roth 401(k)s and IRAs and take advantage of your best option.

Another key component in saving is, well, not overspending. Make sure you aren’t paying for unnecessary things like insurance coverage you don’t need. Chart your expenses and create a budget while you’re working to understand your spending better. This will help you determine your budget in retirement.

It’s critical to have goals – not only for retirement but for savings. Track your progress toward your goals, this can help motivate you toward your next goal. It’s also crucial that you protect your savings. Don’t go spending your retirement savings if you can help it since there are fees and tax implications to taking retirement money early. While you need to protect your savings from your own bad decisions, you also need to do our next thing to do before you retire in the 2020s…

4. Protect Yourself from Financial Predators

Scammers are everywhere, and they hunt in all sorts of malicious ways. Some of their tactics can seem very real, while others are ridiculous. Nevertheless, when your money and sense of security are potentially at stake, taking time to assess the situation and ask all the necessary questions is the right thing to do.

Here’s an example of how a scammer could attack via phone call. Let’s say that someone calls you and claims to be a police officer and says that they have your child in custody. To bail out your child, the officer is asking for $X in gift cards and for your credit card information. Doesn’t that sound that an odd demand?

In this case, call your child immediately to confirm that they’re OK. If your child doesn’t answer, ask the so-called officer to provide more information about themselves or ask questions about your child to help confirm whether they’re lying. Either way, don’t provide them with your credit card information or any other details about yourself.

Scammers are also becoming more active online via cyber scamming. From email phishing scams to hacking webcams to capture potential blackmail footage, cybersecurity continues to be a big issue.

3. Cut Through the NOISE

With 2024 being an election year, there has been plenty of noise to cut through no matter which side of the political aisle you find yourself on. Instead of making knee-jerk reactions based on different headlines you’re seeing on TV, the internet, etc. during times of economic uncertainty, we encourage you to plan for market volatility, work with a team of financial professionals, and continuously monitor your financial plan and update it as necessary.

2. Pay Attention: Understand the Rules, Follow Changes, Stay Tuned-In

Yes, we just told you to cut through the noise. However, you still need to pay attention. Again, doing your own research is essential, as is finding resources you can trust. In this article, we’ve mentioned legislation such as the SECURE Act, SECURE 2.0, and the Tax Cuts and Jobs Act. Our team stays on top of the latest legislation, market trends, and other things that could impact your plans for retirement.

Educating yourself before retirement is paramount. However, it might not be enough to prepare you for our next thing to do before you retire in the 2020s…

1. Plan, Plan, PLAN

It all starts with deciding to put the plan together. Bring the other 19 things to do before you retire in the 2020s together into a beautiful living, breathing ideal of what you consider your perfect retirement. Our team keeps all these components in mind when building financial plans.

As we move onward in the 2020s and look ahead to the 2030s and beyond, it’s time to get into gear and put your plans to retire in motion. If you have any questions about these 20 things to do before you retire in the 2020s and how they relate to your plans for retirement, start a conversation with our team below.

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Remember, the goal isn’t just to get to retirement, but through retirement and to leave a legacy for your loved ones and/or charity if you desire to do so. It’s our goal to give you the Modern Wealth Advantage, which is designed to help you make informed decisions about your financial future and develop a personalized approach to managing your money. Through thoughtful guidance and tailored strategies, we aim to support your financial well-being so you can focus on what matters most to you.

Resources Mentioned in This Article

America’s Wealth Management Wealth Episodes

Modern Wealth Management Educational Series Videos

Guided Retirement Show Episodes

Blog Posts

Downloads

Other Sources

[1] https://www.usinflationcalculator.com/inflation/current-inflation-rates/

[2] https://www.healthsystemtracker.org/brief/how-does-medical-inflation-compare-to-inflation-in-the-rest-of-the-economy/

Investment advisory services offered through Modern Wealth Management, Inc., a Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management a Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.