A 5-Year Pre-Retirement Plan

What your clients should be thinking about as that crucial date approaches

Anne Tergesen of The Wall Street Journalasked Deena Katz, an associate professor of personal financial planning at Texas Tech University, to help her compile a pre-retirement checklist of must-haves. It begins five years out from “the date,” with tasks to be completed annually. Do you have something similar to offer your clients?   

Five Years Out

Lifestyle: Start thinking about how you and your spouse wish to spend time in retirement. Take an inventory of your past and current interests, hobbies and activities.

If you need help, hire a personal or life coach (check the International Coach Federation's "coach referral service" at coachfederation.org) or enroll in an online workshop or course at a college or community organization.

Finances: Take a stab at answering The Big Question: Will I have saved enough to retire in five years?

Start by estimating your retirement spending needs, including taxes and premiums for Medicare supplementary coverage. Consider long-term-care insurance, since the sooner you purchase coverage, the lower the premiums will be.

Take advantage of provisions that allow those 50 and older to contribute an additional $1,000 annually to individual retirement accounts and $5,500 annually to 401(k) accounts.

Think about whether you will need life insurance.

Estate Planning: Make sure you have a will, an appointed power-of-attorney, health-care directives and an estate plan.

Four Years Out

Lifestyle: Start exploring your ideas. If you're considering relocating, research the communities you're interested in. Helpful resources include Relocationessentials.com, NeighborhoodScout.com and RetirementLiving.com.

If you plan to volunteer, organizations including HandsOn Network, VolunteerMatch and Civic Ventures' Next Chapter project can help you get started. To ascertain whether an organization is a good fit, start volunteering now.

Finances: Start thinking about Social Security. You can claim benefits any time between ages 62 and 70. But the longer you wait, the larger your monthly payout will be. Factors to consider include your life expectancy and that of your spouse, who can receive up to half of your benefits. It's also important to consider whether you will owe income tax on any of your Social Security income.

Three Years Out

Lifestyle: If you plan to relocate, start visiting communities on your short list. If you want to start a business, enroll in a course or workshop at a local college or through SCORE, a nonprofit that pairs experts with new entrepreneurs (Score.org; 800-634-0245).

Finances: Request an estimate of any pension or retiree medical benefits you are eligible to receive from your employer. Also, revisit the retirement spending and income plans you

made two years ago. Spend the year living on the budget you have prepared.

Health Care: Get educated about Medicare, which covers a portion of medical expenses for those ages 65 and older, and supplemental policies, including any retiree coverage your employer might provide. Start with "Medicare & You," among other publications at Medicare.gov. For more information, check the website of the nonprofit Medicare Rights Center (MedicareRights.org).

Two Years Out

Lifestyle: If you want or need to work for pay in retirement, consider whether to do so part time or full time. Do the opportunities you want to pursue require additional training? Start networking. Devote more time to hobbies to ascertain how fulfilling they might be as primary activities.

Finances: If you're interested in pursuing a so-called phased-retirement arrangement−which would allow you to reduce your hours gradually, often over a set period of time−approach your employer about entering or starting such a program. The key: Persuade your boss that you're indispensable, while looking for ways to make an impact on a reduced schedule.

Health Care: If you plan to retire before becoming eligible for Medicare at age 65 and your employer doesn't offer retiree coverage, arrange for interim health insurance. Ask your employer about Cobra, the federal law that allows many to continue group health insurance for a limited period after leaving a job. You also can research individual policies available from private insurers. (Warning: Insurers turn down about 30% of applicants ages 60 to 64.)

One Year Out

Lifestyle: If you plan to start a business, draw up a detailed business plan. (See "Essential Elements of a Good Business Plan" at the Small Business Administration's website, sba.gov.) If you want to work, check the listings at websites including RetiredBrains.com, RetirementJobs.com and SeniorJobBank.org.

Finances: Figure out how to convert your savings into a reliable stream of lifelong income. Some new advisory services, including Fidelity's Income Strategy Evaluator and Charles Schwab's Retirement Planning Consultation, can help retirees devise a plan to tap their accounts, while minimizing tax bills and the risk of going broke.

Get a final estimate of benefits from your employer.

Consider whether to roll -- or transfer -- your 401(k) money into an IRA upon retiring. Leaving your money in your employer's 401(k) plan may be advisable if the fees are low. Depending on the state in which you live, a 401(k) plan also may offer greater protection from creditors.

Health care: Address any hearing, vision or dental needs you have now, since these aren't covered under original Medicare.

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