Retirement Planning Checklist

It can be difficult to plan for retirement. It’s one of those things that’s easy to put off until later.

If I’m being honest, the majority of retirement planning just comes down to saving. Keep saving and save some more. Be sure to invest your saved money along the way.

Otherwise, this money just sits in cash not working for you which is a huge opportunity cost. This can be detrimental to achieving your goals and result in millions of dollars lost over a lifetime.

“If you will live like no one else, later you can live like no one else.” – Dave Ramsey

I like this quote because it has some truth to it. The idea is that if you live within your means, it will treat you well later in life. Once you have covered your basic living expenses, it can be incredibly powerful to save large amounts of your discretionary income.

This is beneficial in two ways:

  • You are forcing yourself to save more money.
  • You are forcing yourself to live on a fixed budget.

This will likely extend into your retirement lifestyle which will allow you to need less from your portfolio. When paired together, these two disciplines can help your assets grow so you can achieve your desired lifestyle.

Although saving is more than half the battle, I’ve put together a retirement planning checklist to cover other important areas.

Retirement Planning Checklist:

  • Do you have an adequate amount of cash in your savings to cover emergencies?
  • Do you have an adequate amount of cash in your savings to cover short-term costs like cars, medical deductibles, or home maintenance items like HVAC or roof repairs?
  • Are you saving at least 15% of your gross household income?
  • Are you contributing to your employer’s retirement plan? Can you contribute to a Roth 401(k)?
  • Do you know your marginal income tax bracket?
  • Which is best for you: after-tax or pre-tax contributions?
  • Are you contributing enough to capture the full match?
  • Are you maxing out IRAs: Roth or Traditional?
  • Are you taking advantage of taxable investment accounts outside of retirement?
  • If available, are you taking advantage of employee stock purchase plans?
  • Is your portfolio adequately diversified? Are you overly concentrated in individual stocks or your company stock?
  • Does it make sense to take advantage of Roth conversions between now and retirement?
  • Have you rolled over your old retirement plans into IRAs?
  • Are you taking advantage of an HSA account if eligible?
  • Do you know when you would like to retire?
  • Do you know your budget for retirement?
  • Do you know what your social security benefits will be during retirement? What is your filing strategy?
  • Do you know your retirement distribution strategy in order to manage your tax bill?
  • Do you have adequate life insurance for your family to cover their retirement needs?
  • Do you have adequate disability insurance to cover a loss of income in your household?

Why Do We Plan for Retirement?

Retirement planning is essential because at some point we physically and mentally will not be able to work anymore. When this time comes, we need some money to live on because social security may not cut it. This is especially true considering the state of the social security trust fund and the expected shortfall that is underway.

This is another way of saying that planning for retirement helps us manage the unknown. Retirement planning helps us manage the risk of unexpected events occurring. These events can be a job loss, a death in the family, medical issues, or your business failing.

The brighter side of retirement planning is achieving financial freedom. Once we achieve financial freedom, we can maintain our current standard of living on our own terms. You don’t necessarily have to be tied to a job or income. This is the fun part of retirement planning.

You may be thinking, “What’s the point? I’d rather spend my money now and enjoy it.”

As stated earlier, the trick is to make enough money where your fixed expenses are covered. This includes variable expenses like entertainment and travel.

Once you can assign a fixed budget to these numbers AND save in addition to this, it becomes much easier to reach your goals. It also gets more exciting when you can save and see your money grow. Retirement planning is a balancing act. We can maintain a certain standard of living to still enjoy ourselves while simultaneously saving money for a later date like retirement.

Monitor and Review Your Retirement Plan

My checklist contains only some of the questions to consider as you plan for retirement. They are a good starting point. The key is to understand your financial situation and what’s best for you at the time.

Things change and plans change accordingly. You need to be able to monitor and pivot your plan as needed. The worst thing you can do is have no plan at all. This will be a great way to set yourself up for failure. Be sure you monitor and review your progress a few times per year or when things change so you set yourself up for a successful retirement.

If you’d like an objective second opinion about your finances, please contact Michael Shea, a CERTIFIED FINANCIAL PLANNER™, at Applied Capital. Email him at [email protected] or fill out a contact form.

This blog is provided for informational purposes only. Such views are subject to change at any point without notice. The information in the blog should not be considered investment or tax advice or a recommendation to buy or sell any types of securities. Some of our blogs or information therein have been obtained from third party sources believed to be reliable but such information is not guaranteed. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. No reliance should be placed on, and no guarantee should be assumed from, any such statements or forecasts when making any investment decision.

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