Items to Review as You Step into Retirement

By Chris Duderstadt

April 19, 2023

Items to Review as You Step into Retirement

Key Points – Items to Review as You Step into Retirement

  • Considering Your Retirement Goals
  • What Are Your Plans for Health Care?
  • How Will You Source Your Retirement Income?
  • Developing a Long-Term Tax Plan
  • 7 Minutes to Read | 10 Minutes to Watch

Items to Review as You Step into Retirement

As you think about items to review as you step into retirement, have you thought about what you want to do in retirement? Sure, it can be a big relief to no longer be working and to do what you want to do because it’s what you want to do and not for a paycheck. That’s what Dean Barber likes to call financial independence.

But if you want to retire successfully, you need to build a financial plan that considers your goals for retirement as well as critical financial planning components such as taxes, estate planning, risk management, and investments.

Believe it or not, but stepping into retirement sometimes isn’t as simple as it sounds. That’s especially true if you don’t plan for your retirement. That’s why Logan DeGraeve is going to review some items to consider as you step into retirement so it will feel seamless.

What Are You Going to Do in Retirement?

You’ve worked for most of your life. It’s about time to enjoy what you saved for and let your money start working for you. The biggest thing is figuring out what you’re going to do.

“I hope you’re thinking about that prior to retirement. Five to 10 years before retirement, you need to ask yourself, ‘What do I want to do when I retire?’ It’s time to take action on that.” – Logan DeGraeve

Front Loading Your Retirement

One item you need to review as you step into retirement is front loading your spending in retirement. You’ll likely be healthier during your first 10 years of retirement than your last 10 years of retirement. So, why not spend more during those first 10 years on things like traveling while you’re in better health? That’s a big part of adjusting to retirement because you need to first make sure that your financial plan is built accordingly.

“I hope everyone has a long and healthy retirement. Those first five to 10 years of retirement are what I call the go-go years of retirement.” – Logan DeGraeve

What About Health Insurance?

Speaking of a healthy retirement, what is your plan for health insurance? If you retire before turning 65 (Medicare age), what’s your plan? Are you going to go to the marketplace? Do you have COBRA? If you are 65, what are you going to do for Medicare? But don’t just assume that you need to wait until 65 to retire. That’s why you need to build a financial plan that can give your clarity and confidence about when you can successfully retire.

And Life Insurance?

The other thing with insurance is that you will most likely lose your life insurance at some point in retirement. That’s another aspect of adjusting to retirement that people might not think about right away. You need to make sure that you still have the proper amount of life insurance.

“What I sometimes see is that people might have too much life insurance if their mortgage is small and their kids are grown up. It’s a good time to review what you’ve done from an insurance standpoint.” – Logan DeGraeve

Where Is Your Money Going to Come from?

Another one of the most important items to review as you step into retirement is figuring out where you money is going to come from. It won’t take long to see why that’s critical when you’re early on in retirement.

If you stepped into retirement in January 2022, you might be concerned about how your portfolio has performed and where your money is coming from. One thing our CFP® Professionals like to do with their clients is to determine an income strategy for them.

“Maybe you’re wanting $7,000 net on a monthly basis to do the things you want to do. Where does that come from? Is it a combination of Social Security? What investment accounts does it come from? Do you have a pension? We want to have all that laid out.” – Logan DeGraeve

Taxes in Retirement

A big reason we want to have your income strategy laid out is because you can begin mapping out what your taxes will look like in retirement. It’s imperative to have a forward-looking, proactive tax plan. If you take money from a specific account, what will that do to your taxes? How would that impact the taxation of your Social Security and potentially your Medicare premiums? That’s a big item to review as you step into retirement.

Sequence of Returns Risk

The next item to review as you step into retirement is sequence of returns risk. You need to make sure that money you’re spending early on in retirement is properly allocated so that you’re not taking too much risk. At the end of the day, the biggest adjustment in retirement is that you no longer have a paycheck coming in.

Redefining Your Retirement Goals

Another critical item to review as you step into retirement is what you have from a debt perspective. Do you want to carry a mortgage in retirement? Maybe you’re thinking about buying a second home. This all goes into thinking about what you want to do in retirement.

“I always tell people that anytime you have a life-changing event, you need to go back and redefine your goals. You don’t want to stray too far away from your plan, but the reality is that every day is a Saturday in retirement. You might spend more than you thought as you have more grandkids. As your kids and grandkids get older, your goals and dreams may change.” – Logan DeGraeve

Estate Planning

As your goals and dreams change, it’s important to meet with your CFP® Professional to review those items that you outlined when you stepped into retirement. Are the things that were important to you five to 10 years ago still important to you?

That ties right into having an up-to-date estate plan. Family dynamic can also change. There can be marriages and there can also be divorces. As your grandkids get older, maybe you’ll be moved to start a gifting program for them. Health care directives and powers of attorney are also important items to review as you step into retirement and throughout retirement.

Social Security Is a Big Item to Review as You Step into Retirement

We’ve briefly touched on this, but one crucial item to review as you step into retirement is how to go about claiming Social Security. You want to have a plan for Social Security that complements what you’re doing.

“I oftentimes have clients that say they’re going to take Social Security at 62 because they want the dollars. While it could be a good strategy for you, you don’t want to just jump to that conclusion. Remember that if you or your spouse were to pass away while you’re in retirement, only the highest benefit stays.” – Logan DeGraeve

Where this could be important is looking at that forward-looking financial plan and stress testing it. If one spouse passes away at 80 and the other spouse passes at 95, is the Social Security benefit adequate to make sure the surviving spouse can have a lifetime of income?

Making Tradeoffs

Part of stepping into retirement can also involve tradeoffs. We always tell people to shoot for the stars with what they want to do in retirement. But if you can’t do everything that you want to do, what are the things that are most important to you? Is it traveling? Is it a second home? Maybe it’s giving to charity or to your children and/or grandchildren? Whatever it may be, you need to review what tradeoffs could be on the table.

Reviewing Your Financial Plan

We can’t emphasize enough how it all starts with a financial plan. After that plan is built, you to review your plan a few times a year. With what happened in 2022 from a market perspective, is your plan still on track long-term?

“If you have big plans in retirement, you don’t want to worry about doing the things that you want to do if there’s a 5%, 10%, or 15% market drop.” – Logan DeGraeve

Reiterating Our First Item to Review as You Step into Retirement

We said it at the beginning, but it’s critical to have an idea of what you want to do in retirement before you retire. All too often, people achieved their goal of retiring but don’t know what to do in retirement. We don’t want you to be bored in retirement.

While your goals are going to change in retirement, you need to step into retirement with some initial goals. We recommend starting that process at least five to 10 years before you retire.

“At the end of the day, the most precious commodity we have is time. Especially early on in retirement, you want to make sure you’re doing the things that you want to do.” – Logan DeGraeve

Working with a CFP® Professional

Make sure that you have a good CFP® Professional that can tell you whether your goals are attainable or if you might need to make some tradeoffs. There are a few different things that can happen. For example, let’s say that if you stay on the trajectory that you’re on today, you could end up leaving $3 million behind. That might be feasible for some people, but they might not be comfortable with leaving that much money behind to their kids and grandkids. If that’s the case, then a change needs to be made. You can spend more, give more, or maybe retire sooner.

“I use this analogy a lot, but when we know that there is going to be a legacy or a lot of money left behind, maybe it’s time to start doing some things while you’re still living and give with warm hands. That way you can see your family enjoy it.” – Logan DeGraeve

Figuring Out Your Probability of Success

The bottom line is that as you review these items as you step into retirement, you need to build and review your financial plan. By using our financial planning tool, you can begin to see how these items that we’ve reviewed can impact the probability of success of your retirement. This is the same tool that our CFP® Professionals use with our clients, and we’re letting you use it at no cost or obligation. Just click the “Start Planning” button below to use our tool from the comfort of your own home.

Start Planning

And if you want to review some (or all) of these items with one of our CFP® Professionals before stepping into retirement, we welcome the opportunity to discuss those with you—also at no cost or obligation. Simply click here to schedule a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals. We can meet with you in person, by phone, or virtually—it’s whatever works best for you.

Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. 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.