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A Pre-Retirement Financial Checklist

Many of the calls that financial advisors like myself receive are from people within a decade or less of retirement. While in an ideal world everyone starts saving for retirement in their 20s, the reality is that life sometimes gets in the way of our best intentions.

On a positive note, the last decade or so prior to retirement are peak-earning years for many, so it’s important to have a plan in place to maximize your retirement savings and to prepare for retirement. Here are some pre-retirement financial planning tips to consider.

Maximize your retirement contributions


For many of you, the last ten years or so prior to retirement will be your peak-earning years. It’s important to maximize your contributions to your employer’s retirement plan. For those with a 401(k), the maximum annual contribution for 2017 is $18,000 plus an extra $6,000 catch-up contribution for those who are 50 or over at any time during the year. The same contribution limits apply for those of you with a 457 or 403(b) plan as well.

Don’t ignore IRA contributions either. Depending upon your income, you may or may not be eligible for a pre-tax contribution to a traditional IRA account. Regardless, an after-tax contribution still grows on a tax-deferred basis until withdrawn at retirement. A Roth IRA might also be a good solution for you. Contributions are also after-tax, but the money grows tax-free and can be withdraw free of taxes if certain holding requirements are met.

The contribution limits for 2017 are $5,500 plus a $1,000 catch-up for those who are 50 or over at any point during the year.

Review your Social Security


In the years leading up to retirement it’s important to review your Social Security statements for a couple of reasons. First, you want to be sure that you’ve received proper credit for all the earnings for which you’ve paid into Social Security over the years. This is the basis of your benefit calculation so you’ll want to review this.

Social Security Earnings Record Statement

Second, you will want to look at the amounts you will receive at various ages. This information, along with your spending needs and other financial resources available for retirement will help you decide when to consider claiming your benefit.

In thinking about when to claim your benefit, a few things to consider:

  • Age 62 is the earliest date at which most of us can claim a benefit.
  • Waiting until full retirement age (age 66 for those born prior to 1960, age 67 for those born after) yields a benefit that is about 25% higher than claiming at age 62.
  • Waiting until age 70 results in an 8% annual increase in your benefit amount.


Define your retirement lifestyle

What does retirement look like? Where will you live? What will you do? Will you downsize from your current home, move to another part of the country, or travel?

Retired Couple Enjoying A Beach Lifestyle

These and other activities all come with a price tag that might be higher or lower than what you are currently spending.

Get your arms around all sources of retirement income

Where is the money to fund your retirement going to come from? You will need to get your arms around all potential sources of retirement income to get a true picture of what’s possible for you. Some typical sources include:

  • Your 401(k)or similar retirement plan such as a 403(b) or other defined contribution plan.
  • IRA accounts, both Traditional and Roth.
  • A pension.
  • Stock options or restricted stock units earned while working.
  • Social Security
  • Taxable investment accounts.
  • Cash, savings accounts, CDs, etc.
  • Annuities
  • Cash value in a life insurance policy.
  • Inheritance
  • Interest in a business.
  • Real estate
  • Income from working into retirement.

The next step is to determine how much monthly income that the sources applicable to your situation will throw off. Part of this exercise is also about determining from what sources you will be drawing income and in what order.

For example, if you have significant pension and Social Security income, you may be able to defer withdrawals from retirement accounts like an IRA or your 401(k) until age 70 ½ when required minimum distributions start to kick in. This can save on taxes in the early years of retirement.

Create a retirement budget

Create a retirement budget


Once you decide on your desired retirement lifestyle, you will want to start putting some numbers to the cost of this lifestyle. In other words, you need to create a budget or spending plan for retirement.

While this might change as you get closer to retirement, it’s important to at least focus on a preliminary budget a few years prior to get an idea of the type of income you will need to generate. You will also want to compare your estimated monthly needs to the level of income that you can reasonably expect to generate from the various financial resources available to fund your retirement.

Compare your budget to your projected income


Compare what you can reasonably generate in income from your various financial resources with your anticipated monthly spending. If your income looks to be sufficient, that’s great. If expenses are higher than you have some adjustments to make. These can include:

  • Working longer
  • Adjusting your anticipated spending/lifestyle
  • Working at least part-time in retirement
  • Increasing current savings

If you are a few years away from retirement this provides some time to make adjustments to close any gap that might exist.

Some areas to adjust can include:

Hire professional help


If you’ve not worked with a professional financial advisor in the past, this might be the time to think about it. Depending upon your situation, there can be a lot of moving parts involved and an outside perspective from a professional can help.

Be sure to hire a who is fee-only and doesn't sell financial products. You need advice at this stage of life that is unbiased and that is given with your best interest in mind.

If you’d like to discuss your situation please give me a call at (785) 256-9150 or schedule your FREE initial consultation here.

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About the Author:

Desmond Henry, a financial planner in Topeka, KS

Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.