Retirement Checklist

Automatic contributions remove emotion from the decision. Consistency matters more than the amount in any single month, and it is far easier to keep a habit that does not depend on willpower.

A match is money your employer adds when you contribute, and it is one of the few places where you are paid simply for saving. Ask how your plan's formula works and whether there is a vesting schedule, which determines when the matched money fully belongs to you.

I wrote about this as the first of the Seven Financial Mistakes I Watched Smart People Make.

Source: IRS retirement plans

A common starting point is three to six months of essential expenses, such as housing, food, insurance, health care, and transportation. The right amount depends on your situation, and many people choose to hold more as retirement approaches. Keep this money accessible and out of the stock market, because its purpose is certainty, not growth.

The monthly spending tool can show you what three to six months of your essential expenses would be.

Over a career, it is easy to leave accounts behind at former employers. A simple list of each account, where it is held, and its approximate balance is the foundation for every later decision.

With traditional accounts, contributions are often made before tax, and withdrawals are generally taxed later. With Roth accounts, contributions are made after tax, and qualified withdrawals are generally tax-free. Eligibility and contribution limits change over time, so confirm the current rules each year.

Source: IRS Publication 590-A

Federal law requires withdrawals from traditional IRAs and most employer plans starting at a set age, currently seventy-three for many people and seventy-five for those born in 1960 or later. Roth IRAs do not require withdrawals during the original owner's lifetime. Confirm the rules in effect when you approach that age.

Source: IRS required minimum distribution worksheets

Beneficiary designations generally control who receives a retirement account, even over what a will says. Review them after marriage, divorce, a death in the family, or the birth of a grandchild.

A free my Social Security account at ssa.gov shows your estimated benefit at different claiming ages and your earnings history. It is worth checking that history for missing years, since your benefit is calculated from it.

Source: my Social Security

For anyone born in 1960 or later, full retirement age is sixty-seven. Claiming at sixty-two reduces the monthly benefit by 30 percent. Waiting beyond full retirement age increases it by 8 percent per year until age seventy. There is no single right age. The best choice depends on your health, your other resources, and your household.

Source: Social Security Administration, Benefit Reduction by Year of Birth

Spousal and survivor benefits follow their own rules. The claiming decision of the higher earner can affect what a surviving spouse receives for the rest of his or her life, so it is best treated as a household decision.

More in my article Two Decisions, Not One: What Married Couples Should Understand Before Claiming Social Security.

Source: Social Security retirement benefits

Every retirement estimate starts here. If you are not sure, try the monthly spending tool. Your entries stay on your own device.

Open the monthly spending tool

Some costs fall after work ends, such as commuting. Others often rise, especially health care and, for many people, travel in the early years. A realistic estimate is more useful than an optimistic one.

Medicare generally begins at sixty-five, so retiring earlier leaves a gap that you must fill yourself. Common options include COBRA, which lets you keep your employer's plan for a limited time, usually eighteen months, at your own cost; a plan through the federal or state Marketplace; or coverage through a working spouse's employer. Losing job-based coverage generally gives you sixty days to enroll in a Marketplace plan, so plan this before your last day of work.

Source: HealthCare.gov, If you lose job-based health insurance

Your first chance to enroll in Medicare is a seven-month window around your sixty-fifth birthday. Delaying Social Security does not mean you should delay Medicare, and enrolling late can lead to lasting penalties unless an exception applies. Medicare also generally does not pay for extended long-term care.

Source: Medicare.gov

Most retirees draw from several sources: Social Security, pensions, annuities, and withdrawals from savings. Relying on a single source creates a single point of failure. Knowing when each one starts lets you see the years where income may be thin or unusually high.

One large withdrawal can push you into a higher tax bracket, make more of your Social Security benefit taxable, or raise your Medicare premiums. Depending on your total income, up to 85 percent of Social Security benefits may be federally taxable. Estimating your taxable income first lets you decide how much to take, and from which account, before the tax bill arrives.

Source: Social Security retirement benefits; IRS

Once required withdrawals begin, the amounts are set by law, whether you need the money or not. Some people use the years between retiring and those withdrawals to convert part of their traditional savings to Roth accounts while their income is lower. I have done this in my own planning, but it is not right for everyone and requires careful calculation with your own numbers.

Source: IRS required minimum distribution worksheets

Higher-income Medicare enrollees pay an additional amount on Part B and Part D premiums. It is generally based on your tax return from two years earlier, so a large withdrawal or conversion at sixty-three can affect your premiums at sixty-five.

Source: Medicare.gov

Without a paycheck, no one withholds tax for you automatically. Retirement withdrawals, conversions, and investment income may require withholding or quarterly estimated payments to avoid penalties.

Source: IRS

A career provides structure that can disappear almost overnight. When I left corporate life, it took me about six months to think clearly about what came next. Planning your time deserves the same attention as planning your money.

Work brings daily contact with others, and much of it ends with retirement. Friendships, family, and community take more intention once that routine is gone.

It does not need to be a second career. Teaching, mentoring, volunteering, a serious hobby, or part-time work you enjoy can all give your days direction.

I wrote more about this in What Nobody Tells You About Leaving Corporate Life.

Two people can picture the same retirement very differently. A conversation now is easier than discovering the difference later.