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7 Key Questions to Answer Before Retirement

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Updated March 2, 2020

Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.

Outlining the most important considerations in your last few years of work to ensure you achieve your retirement goals

By Duke Cunningham, Trust Point CFP®, Regional Team Lead-Development

We all have different objectives for our retirement years. Maybe it’s travel, a second home, taking up a new hobby, or helping to put the grandkids through college.

To make those goals a reality, we need to be sure we’re financially prepared for every one of them—and then some. Though we always encourage being proactive in retirement planning (it’s never too early), the last three-to-five years before departing your career are particularly important for making sure you’re set for long-term stability.

If you’re in that window or getting close, here are seven questions to think about. And remember, we’re here to help you get the answers.

  1. What do you want to do in retirement?
    To determine whether your resources are sufficient, it is important to have a good handle on how you want to spend your retirement. This might seem basic, but not accounting for significant travel or assisting a child or grandchild with expenses, as examples, can make a big impact on what resources are available to you.As a starting point, identify your fixed and discretionary expenses leading up to retirement, then consider your plans, including changes, such as transitioning to Medicare. Healthcare is a major consideration, especially if you’re retiring before age 65.   
  1. What are your assets, liabilities and other resources?
    List what you have for investment accounts, retirement accounts, real estate, and personal property. Think about whether you have any intention of selling a property. Also identify any current and future debts—mortgages, auto loans, lines of credits, etc.—and build a balance sheet. We offer a free information organizer to help you compartmentalize all of this important information.
  1. Do you have an emergency fund?
    We recommend that anyone who is working should have three to six months of living expenses built up in a savings account in case of an emergency. When retirement is approaching, we recommend building that up to six to 12 months.An emergency fund pre-retirement is important in case of an unplanned absence from work—you need the liquidity to cover those fixed expenses. However, building up that liquidity into retirement is crucial because if we experience a market correction in the midst or beginning of your retirement, you want to make sure you have some assets and don’t have to sell your investments in a tough market.
  1. Is your current debt paid off?
    If you still have existing debt, make sure to attack it with the highest interest rates and continue to roll those payments into other debts until you’ve paid them off. Unsecured debt and auto loans are especially good to take care of as soon as possible. Mortgage debt can sometimes be saved for last because of low interest rates—we’re seeing more retirees carry mortgages into retirement.Instead of paying off their mortgage, they may choose to stash more away for retirement.  So when they retire, depending on market conditions, they have the ability to either pay off their mortgage or use the liquidity for their retirement living needs.
  1. How well do you understand your investments?
    Consolidation of your investments is oftentimes paramount at this point in time. It’s easier to better understand and manage your risk of your investments when they are consolidated, versus having them sprinkled out in multiple retirement accounts, savings accounts, and investment accounts. You can also reduce investment management expenses with consolidation.Also in respect to understanding your investments is diversifying your retirement savings. How are you using your Roth IRA or 401K? Are you saving everything pretax or have you built up additional taxable savings? Trust Point can help make sense of your investments and make sure they are diversified and best suited to your needs.
  1. Do you know your healthcare options?
    We hit on this in number one, but it’s crucial to research and understand what healthcare benefits are available to you and your spouse, considering options from both employers if applicable. And understand when to apply for Medicare as there can be penalties for not doing so on time.
  1. When do you plan on receiving Social Security?
    You can begin receiving Social Security benefits as early as age 62 or as late as age 70. Keep in mind that your benefit is reduced by approximately 25 percent if you take retirement at age 62. At full-retirement age (depending on your date of birth, between ages 66 and 67), you receive 100 percent of your benefit. If, however, you delay taking Social Security until age 70, you will receive approximately 132 percent of your benefit.The decision to take or delay your benefit is a personal one and depends on how long you choose to work, your retirement savings, how long you think you will receive benefits, whether anyone else in your family can get benefits on your record, and even your health. If you plan to work while receiving Social Security benefits before you reach full retirement age, keep in mind that it can impact your benefits:If you are under full retirement age for the full year, your benefit will be reduced by $1 for every $2 you earn above the annual limit ($17,640 in 2019).When you reach full retirement age, the benefit is reduced by $1 for every $3 you earn above a different limit ($46,920 in 2019—however only earnings before the month you reach your full retirement age are counted).

    After you reach full retirement age, your earnings no longer reduce your benefit.

    When you do decide to apply for Social Security, you can start the process up to four months before you want your benefit to start. However, you must be at least 61 years and nine months old. If you want your benefit to begin in a particular month, you must apply at least the month before. Apply online at www.ssa.gov or by calling Social Security at 1-800-772-1213.

By answering these questions, you’re going to understand your probability of success with regards to your retirement plan. That doesn’t necessarily mean you’re going to have a successful plan, but that’s why it’s important to consider these factors in the few years before you retire. That way you can identify necessary changes and implement a plan to make them, so you can retire with confidence.

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Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.