5 Things to Do Now if You’re Near Retirement

Young couple calculating budget

Believe it or not, the last five years before you retire may be some of the most critical in retirement planning.

Don’t wait until the very last minute to make sure you are prepared, says Michael H. Milarski, a partner and senior financial advisor with Signature Financial Planning.

“Retirement is such an important transition for an individual and, oftentimes, people are so busy with their day-to-day lives that they don’t sit down to begin planning for this transition until they are a few months from their desired retirement date. As a result, they find themselves scrambling to try and get all of their ducks in a row at the last minute,” says Milarski.

He says these are the five things to work on in the five years before retirement.

Forecast post-retirement monthly expenses

Estimating how much savings is needed for retirement is complex. Along with calculating your monthly bills against your projected income, you should include all of the things you want to do once you leave the workforce. Travel, hobbies and spending more time with your grandchildren are probably on many baby boomers’ list, and most of these will cost money.

“This is the single biggest driver of a retirement plan,” says Milarski. “What is your monthly expense need and how are you going to fund it? Do you have enough income coming into your household to meet that monthly expense need for the rest of your life?”

Create a plan to avoid a lapse in medical coverage

Medical insurance is so important, especially as we age. With the new laws under the Affordable Care Act, if you lose your coverage for any reason other than what is considered a qualifying event, you will not be able to get health insurance until the annual open enrollment period.

Milarski warns pre retirees to “make sure there is not a gap in medical coverage between your ideal retirement date and the time you become eligible for Medicare.”

Develop a plan for when to initiate retirement income

Once you determine what you’ll need – next comes figuring out the how and when to access your retirement savings and create an income stream that will last the rest of your life.

“Once you determine your monthly retirement budget, you need to determine how to fund that monthly budget through your available retirement income sources – whether that be from Social Security, pension, retirement investment portfolio -- then, you need to develop a plan to initiate all of your retirement income sources in the most appropriate and timely manner possible.”

Make sure estate planning documents are updated

Estate preparation and protecting your loved ones from the unexpected is another area that needs close attention when nearing retirement.

“A will, living will, power of attorney – if you have not created these documents in the past or they were created quite some time ago and your circumstances have changed, for example, your children are grown and/or you have accumulated more assets, you should meet with an attorney to create or update your estate-planning documents to ensure your assets pass on to your beneficiaries exactly as you wish and in the most tax-efficient manner possible” says Milarski. “These documents will also ensure that your medical care is carried out exactly as you wish.”

Consider tweaking your life insurance portfolio

Life insurance is purchased to provide financial protection for your spouse and children who rely on your income for support. Once the kids grow up there may be less of a need to continue paying your life insurance premiums.

“If you have an existing life insurance portfolio that was created years ago, you should make sure it is still appropriate for you and your family. Typically, retired individuals have very little debt as their mortgage and/or vehicles may be paid off and their children have graduated from college/grad school and are on their own, so life insurance coverage may not be as high of a priority as it once was,” says Milarski. “Have an experienced and trusted agent look over your coverage to make sure it is still suitable for your current situation.”