Retirement Planning Checklist: 5 Steps to Financially Prepare for Your Golden Years

Back to Blog

Retirement is meant to be an exciting time of freedom, a season to enjoy the investments you’ve made after years of hard work. You get one shot to do it right, and it can be scary to imagine a “failed” retirement–one where you end up going back to work not by choice, but out of necessity. Fortunately, there are ways to ward off these kinds of scenarios and protect yourself from risks as you prepare for life after work.

Planning for the future can be complicated, so we’re sharing our simplified checklist to help you get started. Below are some tips to prepare your finances so you can make the most of your golden years and avoid unnecessary risks along the way.

I: Paint a Picture

The first question you need to ask yourself is this: What does my retirement look like? Once you know how you’ll spend your time, you can create a more detailed plan for spending your money.

Ask yourself the following questions:

  • Will I transition to working part time in my current job, start a new part-time job, or not work at all?
  • Are there any hobbies I want to explore that I’ll need to budget for?
  • How often do I plan to travel?
  • Will I live in the same house (or apartment) or downsize? Will I want a “summer home?”

Something else to consider is whether you want to spend time volunteering—some volunteer opportunities might require you to travel, which will of course impact your spending. You might enjoy traveling frequently (whether to vacation, volunteer, or visit family) early in retirement but decide to stay closer to home as you get older.

The more detailed answers you can come up with, the more accurate your projected retirement budget will be. Of course, you may not have definite answers for all these questions now, and your preferences may change over time, but as you consider your options and how to budget for them, you’ll create greater financial flexibility for yourself in retirement.

II: Evaluate Your Expenses

One of the best ways to determine how much you’ll spend in retirement is to review how much you spend now. Remember, though, that once you stop working, every day becomes a Saturday—many people spend more when they retire than they did while working because they travel more or participate in other forms of entertainment more frequently. Some people spend the same amount as during their careers, but few people spend less when they retire.

If you don’t already, start tracking your expenses with an online budget tool or tracker. Then consider additional expenses you might have when you retire—for instance, if you want to travel, take cooking classes, or experience other new hobbies, you’ll need to factor those into your budget. If you plan to live somewhere other than your current residence, you’ll want to review the cost of living expenses in that location.

Another thing to consider is your health and how it might change over time. You’ll want to create a plan for unexpected medical expenses, especially if you have health conditions that could worsen as you age. If you retire before 65 (when you would qualify for Medicare), you’ll also need to account for the cost of medical insurance, especially if your current policy is through an employer.

As you create a rough draft of your budget, remember to evaluate your needs versus wants. Some of your needs, like healthcare and housing costs, might fluctuate in retirement, and that will affect how many of your “wants” (like vacations, eating out, and buying gifts) you can practically budget for.

III: Create a Distribution Plan

Most people focus on saving money for retirement–but you also need to determine how you’ll spend that money once you’re no longer generating income. There are two primary ways to create cashflow during retirement: through guaranteed sources and non-guaranteed sources.

Guaranteed sources include funds like pensions, annuities, and social security that provide guaranteed income in retirement.

Non-guaranteed sources have the potential to provide a greater return than some guaranteed sources, but that return can vary depending on market fluctuations and individual investments. These include investments like stocks, bonds, mutual funds, exchange traded funds (ETFs), and real estate.

Once you have an idea of a budget, you need to determine how you’ll manage your income and investments during retirement. For example, if you have a pension, consider whether it will cover your necessary expenses, or if you should supplement it with an annuity. How much money will you need to withdraw each month? Will you automate that process or handle it on a case-by-case basis?

Coordinating cashflow from multiple sources can be complicated, and sometimes hiring a professional to manage the details can provide the peace of mind it takes to enjoy your retirement. When you talk with an advisor, they can also help you determine what types of income sources make the most sense for your lifestyle and how to best manage them both now and in retirement.

Iv: Manage Risks

Retirement should be a time of celebration and enjoyment, but even with careful planning, life doesn’t always happen as we expect it to. That’s why it’s important to create contingency plans for your life after work. You’ll want to ask yourself these questions:

  • What happens if my health is compromised and I need critical or long-term care?
  • Will my nest egg last throughout my retirement? How do I make sure I don’t outlive my savings?
  • Will my income and investments keep up with inflation?
  • What if taxes increase (as they notoriously do)?
  • Is my investment portfolio in line with my risk tolerance?
  • What happens if I lose money in the stock market shortly before I retire?

Some of these questions might evoke hypothetical scenarios you don’t yet have a plan for—and that’s why you should think about them now, while you have a chance to prepare. Managing these risks before retirement ensures you can enjoy your golden years without nagging “what-ifs”.

V: Stress Test

Over time, your financial situation and goals often change. Maybe you or your spouse decide not to work part time in retirement, or you decide you’d like to leave a donation to your favorite charity. You might also have negative experiences that affect your finances, like a prolonged bear market or unexpected expenses from a stay in long-term care.

All these things impact your finances in retirement, so once you have a plan in place, you’ll want to have an advisor run an analysis to see how your funds hold up to unexpected financial stress. A good advisor will be able to forecast these kinds of scenarios and determine if your wealth is positioned for success in a volatile environment, or if you need to adjust your strategies to create a more substantial cushion.

You’ll want to factor in these possibilities as soon as possible. That’s why it’s important to regularly review your retirement strategy and portfolio. We recommend meeting with a financial professional annually so they can perform a stress test and help you adjust your budget accordingly.

VI: Implement

A plan is only as good as its follow-through—so once you have an idea of where you are and where you want to be in retirement, create a timeline to help you implement your retirement planning checklist. If you have trouble getting started, feel unsure of your next steps, or need help articulating your long-term goals, we recommend discussing your situation with an advisor. We can help you prioritize your objectives, identify strategies to help you meet your goals, and hold you accountable as you grow.

There are many factors to consider when preparing for retirement, and this checklist is just a brief overview to help you get started. If you’d like to learn more about creating (and implementing) an effective retirement plan, stay tuned for our upcoming blogs where we’ll discuss each step in more detail. As always, feel free to reach out to us if you have questions or want to discuss your personal financial situation.

Sign up to be notified when we publish a new blog!

This article is intended to be for general information about the topic(s) described only, and should not be used as financial advice specific to your situation. For financial advice pertinent to your lifestyle, goals, risk tolerance and opportunities, please contact a financial professional.

Carmine Coppola and David D’Albero are financial advisers offering investment advisory services through Eagle Strategies LLC, a Registered Investment Adviser. They are Registered Representatives offering securities through NYLIFE Securities LLC (Member FINRA/SIPC), a Licensed Insurance Agency. They are also agents of New York Life Insurance Company.

This article is intended to be for general information about the topic(s) described only, and should not be used as financial advice specific to your situation. For financial advice pertinent to your lifestyle, goals, risk tolerance and opportunities, please contact a financial professional.

Carmine Coppola and David D’Albero are financial advisers offering investment advisory services through Eagle Strategies LLC, a Registered Investment Adviser. They are Registered Representatives offering securities through NYLIFE Securities LLC (Member FINRA/SIPC), a Licensed Insurance Agency. They are also agents of New York Life Insurance Company. Strata Capital, LLC is not owned or operated by NYLIFE Securities LLC or its affiliates.

Neither Strata Capital nor, NYLIFE Securities LLC and its affiliates, nor its representatives, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.