Five Retirement Points for Five Years Before You Retire

Senior Couple Meeting with Male Financial Advisor

If you’re reading this, pull out your stretch pants. Retirement is on the horizon! This season is an exciting prospect for many, and choosing how to spend your golden years is largely impacted by the planning you do today.

Consider these five points through the lens of your inner analyst, and maybe allow yourself to engage with your creative side a little, too.  

Point One – Estimate your monthly income and allowances. 

Easy, right? First things first, zoom out. You’re looking for a rough estimate. Start with the Social Security website for an idea of what your monthly benefit will be. Then, factor any pensions that you or a spouse might be entitled to (No pension? No problem—they are less common these days). Finally, how much will you pay yourself? If bossman (or, ahem, bosswoman) isn’t sending you checks anymore, there might be a gap that only the Y.O.U. of your Family Inc. can fill. Take stock of your nest egg, and get your [smart, charming, witty] financial advisor’s opinion on how much of a paycheck you can afford yourself in retirement. Income needs during retirement are fickle—they might decrease based on a lesser need for extras, but they might quickly change based on your health or family circumstances. Estimating on the higher side could help. Finally, don’t forget to factor your Required Minimum Distributions, which your aforementioned [smart, charming, witty] financial advisor can help you approximate. (By the way—RMDs are IRA withdrawals that are required past a certain age. They are taxable.)

Point Two – Where will you live? 

Do you live in a state that doesn’t require as many taxes? If not, have you considered moving to one? (Shameless plug for Tennessee!) Many retirees consider downsizing to lower expenses. Some move closer to family to help care for grandchildren or loved ones. Overall, there can be many benefits to living closer to family as you age, not just limited to the “grandpa, watch this!” stories you’ll inevitably collect.

Point Three – Consider your debt and taxes. 

Do you want to stay debt-free in retirement? Is your home paid for? Do you want to pay cash for your next car? If you answered “yes,” “no,” “yes,” then let’s plan. Retiring to a lower income tax bracket is also possible, though not as much of a given as some might think. Strategically moving a portion of your funds from a traditional IRA to a Roth IRA could produce a source of tax-free income, though you have to account for the one-time tax hit each time you transfer some from one bucket to the other. Before you make any decisions, talk with a qualified tax professional—also likely to be charming and wonderful—to see if this move is right for you. Income and age restrictions may apply.

Point Four – Healthcare costs. 

Will you apply for and be eligible for Medicare, and will this cover your present and future needs? (You definitely know what your future needs are, right?) Could you or a loved one need long-term care at some point during retirement? How might this affect your overall bottom line? Once again, it may help to estimate on the high side.

And last and possibly the most important, Point Five – What will you do? 

Our FAVORITE question because it’s meaningful. How do you dream of spending your days? Will you take time to travel and see the world, or would you prefer to keep closer to home and pick up a new hobby? If you plan to hike in the woods or volunteer 5 days a week, you’ll probably spend less in retirement than if you book luxe international vacations every other month. Are there people or causes that you dream of being generous toward? Setting up endowments and planning to treat your grandkids to ice cream each week are both awesome goals that require different types of planning. And/or wet wipes. However you envision your retirement, it’s important to make sure your financial picture will mesh with your overall goals.

The good news? You get to choose what the retirement of your dreams looks like. The harder news? You’re also in charge of getting there. This involves setting detailed goals and a defined strategy to reach them (which is a language we speak fluently, by the way). Whatever your plans are, make arrangements beforehand so you can enjoy your retirement as worry-free as possible.

***Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Benchmark Wealth Management
5855 Ridge Bend Road
Memphis, TN 38120

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPIC.

The opinions voiced in this material are for general information only and are not intended to provide
specific advice or recommendations for any individual. There is no assurance that the views or
strategies discussed are suitable for all investors or will yield positive outcomes.
Investing involves risk including possible loss of principal.

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