Your Pre-Retirement Checklist for Financial Readiness

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A successful retirement doesn’t come automatically when you turn 65. However, with a bit of planning and preparation, you can ensure your golden years are some of your best yet when it comes to finances. To help you assess your financial readiness, we’ve rounded up some essential items to include on your pre-retirement checklist. Think of this as your go-to guide to retirement-preparedness basics about everything from taking inventory of your assets to assessing your healthcare needs. Ready to start checking off those to-do list boxes?

Do You Have an Inventory of Your Assets?

One of the first things to do before you think about retiring is to take inventory of your assets. This means looking at properties you own, bank accounts, investment accounts and retirement savings. These will likely serve as your main sources of income during your retirement, so it’s important to take stock of where you stand, along with the value of each category, to determine how well you’re prepared to live the lifestyle you’re anticipating in your golden years.

While you’ve likely given some thought to where you want to live, for example, it’s important to calculate if you need to sell your current home in order to have the money you need in retirement to purchase a different property. Many people, for example, sell their primary home before they retire and move into a less-expensive home during retirement. They may also own more than one property and choose to sell one to have liquid funds on hand. This all depends on your unique financial situation. If you have enough assets to live comfortably in retirement, selling a home may not be necessary. If you have a lot of equity or own a property in a booming real estate market, it may make more sense to cash in on the sale of your home, save some of the money and move somewhere else.

In addition to real estate, other assets include your bank accounts, retirement accounts and any investments you have. Download or print a statement from each and take note of the balances just to get a general snapshot of your financial standing. See how much you have in each — is it already enough to live the way you hope to? If it isn’t, it’s never too late to make a significant savings push, consider selling assets or investing more in order to reach your goals. This is why the checklist is so important to review at various stages before you retire.

Do You Have an Emergency Fund?

While your assets and income are important during retirement, you also don’t want to overlook an emergency fund. Emergency funds become increasingly important as your healthcare needs change. You’re also no longer working, which means you may not have a conventional, ongoing income stream from a job to fall back on if you experience a costly unexpected expense.

Emergency funds are separate from your assets and investments for a few reasons. One is that you’ll want to keep these funds liquid because you’ll likely need to access them quickly. Your home, for example, isn’t liquid because you can’t expect to sell it immediately if you need money within hours. This is why having a separate emergency fund in a bank account that’s easily accessible is important. This can help you with home repairs, auto repairs, medical bills or unforeseen healthcare costs that may come up during retirement.

The other reason it’s important to keep your emergency fund separate is that you don’t want to accidentally use it and leave yourself without that financial cushion when you need it most. If you don’t already have an emergency fund, or if you’ve started one but don’t have much saved up, you’ll want to do this before you retire. Experts recommend saving up and setting aside at least a year’s worth of expenses for a retirement emergency fund, but it doesn’t hurt to put away more.

What Debts Do You Have?

In addition to your assets, you’ll also want to take inventory of your debts. Determine how much money you still owe on your properties, cars and credit cards, for example. You may also still have loans from a child or grandchild’s education on your plate to consider. It’s important to factor any debt you’re carrying into your retirement planning. Once you leave your career, you want to make sure you have enough retirement income and assets to cover all your debts if you won’t have them paid off by the time you retire.

Calculating your debt will also help you determine what disposable income you’ll have. The less debt you have, the more money you have each month to pay for other things. Without a mortgage, for example, you may have more money available to travel, invest or put away for loved ones. It’s also helpful to know what you’ll have in the short term each month for living expenses.

The sooner you take a look at your debt, the sooner you can make a plan for paying it off. If living debt-free in retirement is important to you, you’ll want to start planning for this while you’re still working. Strategies could include making extra payments each month on your home or car loans. Paying off small loans and credit cards will also help reduce or eliminate your debt. 

How Is Your Income Shaping Up?

While looking at your assets and accounts, it’s also time to check out your earnings and income during retirement. Take a deep dive into your investments, retirement accounts and any workplace retirement savings you may have to see what the monthly returns or income payments will be once you’ve retired. This may also include your Social Security income. Watch for any penalties, age restrictions, or early withdrawal fees to help maximize your income potential.

Learn how to calculate your retirement income as a starting point. Take a look at your current monthly budget and expenses and see how these will change or look during retirement. This can help give you a better idea of what will stay the same or what will change when you’re no longer working. Some retirees also find it helpful to get another less-demanding job. You might start consulting for your former employer, working part-time to help boost your income or just doing something you’re passionate about. If you find you need more money after you’ve formally retired, continuing to work may be an option worth exploring.

What Are Your Plans for Health Insurance?

Healthcare is a critical part of retirement planning. As people age, their healthcare needs change. Without employee-backed healthcare, it’s important to look at all your options. Whether it’s Medicare, private insurance or a combination approach, take some time to find the best option for you and your spouse or partner.