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5 Steps to Take in Your Final Year Before Retiring

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Updated August 22, 2022

Brenda Stuhr, CPA, CTFA, Vice President, Wealth Management/Learning & Development

After decades of employment, you’re finally on the homestretch toward retirement. Your last day of work is set and it’s only a year away. Are you ready?

It’s a question we all need to ask ourselves eventually. The final year of your career can be a busy and emotional time. It’s also a time to make sure you’re prepared for what’s next. Before retirement arrives, it’s important to take inventory of some key financial decisions, along with getting ready mentally for the next stage of your life. Use this checklist to help guide your retirement readiness.

Did you know? Most Americans hope to stop working by age 62.

Natixis Investment Managers 2021 Global Retirement Index

1. Create a Budget

Once you retire, your steady paycheck will need to be replaced with other sources of income. Those include 401(k) plans, individual retirement accounts, taxable brokerage accounts, Social Security, and pensions.

You’ve probably budgeted in one way or another throughout your life, but now you need to determine how to draw on those investments in a way that will maximize the life of your nest egg while minimizing income taxes. That will require taking a hard look at your expenses — prioritizing your needs vs. your wants — and care-fully choosing how to withdraw funds.

2. Decide Where to Draw

The standard rule of thumb for retirees is to take income from taxable accounts first, then from tax-deferred traditional IRAs and 401(k)s next, and letting Roth IRAs compound tax-free indefinitely. This lets traditional IRAs and 401(k)s grow tax-deferred until the required distribution age of 72.

Another goal of retirement distribution planning is to maintain a steady marginal tax rate year over year. It is important to be mindful of the funding source for larger periodic purchases — such as anew car or retirement home — and whether to take from taxable or tax-free sources.

Of course, other factors can change where you withdraw. Your retirement age is a key consideration, along with your estate planning goals, and when you claim Social Security. A Trust Point financial professional can help you make the best decision for your situation.

3. Consolidate

You might have different pockets of money in different places — an investment account with one advisor, a retirement plan with a past employer, etc. We recommend consolidating assets under one advisor, making investments easier and more efficient to track and manage, which tends to produce better outcomes.

4. Make Sense of Medicare

Once you leave the workforce, you’ll also leave your employer-provided health insurance. For most retirees, that means you’ll depend on Medicare for your health care needs. Medicare is complex, but it’s a good idea to get a good handle on how it works, what you can expect to pay in premiums, coverage gaps, and, importantly, what you can afford. You can get started at medicare.gov.

5. Find Purpose

For many of us, our jobs become part of our identity and life without work can be jarring. It’s important to consider what provides meaning in your life. How can you not only fill your days, but maintain a sense of purpose? Whether it’s travel, hobbies, spending time with family, or volunteering, it’s important to do something you find fulfilling with your newfound time.

Trust Point is here to make retirement planning easier for you so you can focus less on finances and more on living your best life.

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Brenda Stuhr, CPA, CTFA, Vice President, Wealth Management/Learning & Development