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10 Last-Minute Retirement Tips

by Steven Merkel
Tuesday, May 26, 2009

provided by Investopedia.com

In the United States, there are about 78 million baby boomers. By 2008, the oldest had already turned 62, the earliest eligible age for Social Security benefits. Over the next ten years, many more are expected to retire or at least start to think seriously about their retirement situation. The stakes are high, and blunders in the months leading up to your retirement can haunt you for the rest of your life. Here are some of the important steps you should consider prior to entering your golden years.

Prepare a Retirement Income Plan

The very first step that every soon-to-be retiree should do is to construct a written budget and balance sheet. In the budget, you'll need to look into the future and determine your cash inflows (income) and cash outflows (expenses). Hopefully, your inflows exceed your outflows, or you're already off to a bad start. Next, you should draw up a simple balance sheet listing your assets and debts to help determine your net worth. Since many retirees will need to live off a portion of their savings, it's important to know your bottom line. You'll also need to factor taxes into your retirement equation, which could be higher or lower depending on your situation in retirement.

Social Security

If you're eligible to receive Social Security retirement benefits, you should contact the Social Security Administration (SSA) for an estimate of your entitlement approximately six months prior to your actual retirement date. Once you've obtained this quote, you can review the current benefits associated with the various retirement dates. When you've decided on a retirement age, you should file your SSA application three to four months prior to actually retiring. You can do this by calling SSA directly or using their online application.

Set Up Healthcare

As you contemplate your retirement, you'll need to consider your health insurance and how you plan on paying for it. If you retire early, do you have the option to still use employer-provided health insurance for you and your spouse or do you need to seek out private insurance? Even at the normal retirement age Medicare will help but you'll still have to foot some of the bill. For example in 2007, the centers for Medicare and Medicaid services estimated that out-of-pocket expenses amounted to $3,800 per year for a single individual or $7,600 per couple. In addition, items not covered by Medicare such as eyeglasses, hearing aids, dental care and more may amount to another $500 for a single person or $1,000 for a couple.

Discuss Pension Options with Current Employer

If you're still one of the "lucky ones" that qualified for a company pension plan, you'll want to contact your administrator about six months prior to retirement for your payout options. One of your most difficult decisions will be whether to take a single or joint life payout, so you'll need to think it through carefully. For most of us not receiving a pension, we'll still need to think about 401(k) rollovers or other distribution options. If you have company stock options, you may want to consult a financial professional so you don't end up paying a large, avoidable amount of taxes when cashing out.

Consider Long-Term Care Insurance

One of the most frequently overlooked areas of life planning is long-term care insurance in the event that you or your spouse needs some form of specialized care or assistance. Consider policies that have coverage for help with daily activities, adult day care, assisted living services, visiting home nurses and nursing care. A policy that covers both spouses will afford you the best rates and eliminate the gamble of which spouse will need care first. Some companies now allow you to pay off the policy with a lump-sum payment, thus avoiding monthly or annual premiums.

Establish a Cash Emergency Fund

An emergency cash fund is there to get you through the hard times. It acts as a safety net in case something expensive or unplanned happens, such as medical expenses, market downturns or expensive home maintenance issues, just to name a few. During normal economic conditions, most retirees should have three to six months of emergency cash reserves available separate from their investment portfolio. If economic times are tough and you're living off your savings then you should also consider adding 12 to 18 months of cash to your investment portfolio to allow bonds and stocks to recover during bad times.

Update Estate Documents

Many people think that just because they have a small estate or low net worth that they do not need any estate planning. This couldn't be further from the truth; retirement requires even more life planning solutions than during the working years. Some of the more common items to consider include power of attorney, healthcare surrogate, beneficiary updates (IRAs, annuities, 401(k) plan, etc.). If your net worth happens to be high, you may want to consider charitable trusts, generational trusts, or outright gifting techniques.

Asset Consolidation & Awareness

Why do we tend to have several different and sometimes identical accounts at several different banks, brokerage firms or even past employers? Retirement is a great time to take your finances by the horns and round up the paperwork posse. Consider consolidating all of those 401(k) plans into an individual IRA or possibly working with only one or two custodians.

Make a written list of all of your savings and investment accounts, along with all of the insurance policies on both spouses. In many cases, one spouse writes the checks for all the bills around the house. It's good to alternate which spouse pays the bills every once in a while to make sure that you both understand the family expenses, investments and insurance policies. In the event of one of your deaths, the other spouse will need to assume those responsibilities.

Large Purchases

As you prepare for retirement, you may have your sights on one or several big-ticket items such as a boat, new car or home. Consider making such large purchases and paying them off before you hit retirement, while you are still earning income. You may also want to pay off existing or new insurance policies, start on your estate plan earlier due to attorney costs and take care of other debts prior to retirement.

Review Life Insurance Needs

Life events such as marriage, divorce, new babies, changing jobs and retirement change everything. These events are prime opportunities to review beneficiaries on life insurance policies, obtain more or less insurance and maybe even qualify for senior reduced rates (maybe not life insurance but auto perhaps). Maybe you lost your current life insurance coverage from your employer, your new estate plan requires additional insurance or you elected single pension payout and you're concerned about spousal income at your death. Whatever the case may be, a review should definitely be considered.

The several months prior to retirement require lots of research, planning and time in order to make prudent and knowledgeable decisions. Several pre-retirees will want to get their CPA, financial planner and estate attorney in on the process in order to cover all of the different avenues. Doing so will ensure that nothing is missed and to confirm retirement is a sustainable reality. It's one of the biggest decisions of your lifetime, so don't take it lightly. Proper planning and wise decisions will make it an everlasting reward.

Steven T. Merkel, CFP®:, ChFC, is the vice president of portfolio management for Financial Advisory Consultants LLC in Naples, Fla. Steve is a former U.S. Army air defense artillery officer and has been giving financial advice for more than 12 years. He is a Certified Financial Planner® practitioner and a Chartered Financial Consultant. Merkel has been featured and widely quoted in numerous publications including The New York Times, BusinessWeek, Entrepreneur, Consumer Reports, Investment News, Financial Planning Magazine and Fidelity's Stages Quarterly. He enjoys fishing, golf, military history, Miami Hurricane football and relaxing on the beaches of South Florida

Cheers

By huskie on May 26, 2009, 03:14 in Friendly Talkzone.

dwmte7 says on May 26, 2009, 04:07:

yeah, right!

what does a young spring chicken like you know about retirement?

hehe

patriarch

0 funny, 0 helpful.

Miguel_Clavo says on May 26, 2009, 04:58:

a post with lots of good advice, huskie, but these are not really "last minute" items...mid-career, 10 years out, 5 years out, and the final last year benchmarks are really important...there really isnt a last minute anything....if you start at the last minute, you have already lost...especially with investment income, etc...imho......

Lets hear it for the new PBH Experts on Colombia! DrPhilinamillion, KY, and Darloops!!!!!!! We Salute Your Valuable Contributions to This Forum!

0 funny, 0 helpful.

dwmte7 says on May 26, 2009, 05:50:

good advise miguel.....what does one do when they go backrupt (tits up) in the last five years of their work life. the rodney king riots took everything, and since pres bush, the father, declared los angeles a "federally designated riot zone" just about all insurance was null and void. (no body had riot floaters) pity.

patriarch

0 funny, 0 helpful.

Miguel_Clavo says on May 26, 2009, 06:18:

i agree with you doug...we have discussed that before.....the last 5 years are critical as you have access to more timely information.....but take the example of the airlines union employees who had already retired.....they made life decisions on the pension income, which, after they retired, was cut almost in half by the courts.....talk about foked up....i am surprised none of them went "avionic" on some people....cant say i would blame them either.....

Lets hear it for the new PBH Experts on Colombia! DrPhilinamillion, KY, and Darloops!!!!!!! We Salute Your Valuable Contributions to This Forum!

0 funny, 0 helpful.

jusjoseph (☼Travelguide writer) says on May 26, 2009, 06:22:

dwmte7 Do you expect the government to save you from everything? HATER !

0 funny, 0 helpful.

Timba says on May 26, 2009, 06:28:

What happened to smoke more, drink more and drive faster ?

0 funny, 0 helpful.

Boatygringo says on May 26, 2009, 07:18:

I think the number one thing to do before you retire is to GET OUT OF DEBT. If you dont owe any one a dime you can do as you please. The world is your oyster and all that.

Boatygringo

0 funny, 0 helpful.

wendell13 says on May 26, 2009, 08:37:

Just about the best advice I have seen here, Boaty

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