A Retirement Checklist

A Retirement Checklist

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For most of us retirement is a very happy event. We can look forward to living our lives on our own timetable and under our own terms. Hopefully you have several activities scheduled so that the 40 hours of work you are used to are filled with things you want to do but probably didn’t have time for.

For most of us, however, the transition to retirement can also be stressful. We need to finalize our retirement plan, assuming we have one, so that the employment paycheck is replaced by a retirement paycheck that can come from pensions, Social Security, and investment accounts.

Your retirement paycheck will involve changes in your tax situation that you will want to factor into your distribution plan. Assuming you want the same in after-tax income, you will most likely see a fairly dramatic decrease in your effective tax rate—great news! This is due to not having to pay Social Security and Medicare taxes on your retirement income. Your Social Security benefits are also taxed less on the federal level and most states provide tax-friendly taxes on Social Security and pension benefits.

You will also need to determine how best to rollover your company retirement plan. If it includes appreciated company stock, you will want to work with your financial advisor to determine if using the Net Unrealized Appreciation option makes sense for you. If your plan includes after-tax contributions you will need to determine if these contributions should be taken in a lump sum or rolled to a Roth IRA. If you are retiring between age 55 and 59 ½ you will need to determine how much, if any, you should leave in your company retirement plan so you can take penalty-free withdrawals prior to age 59 ½.

You also need to determine what you will do to continue health insurance coverage. For those at or over the age of 65, this typically involves Medicare. You can access Medicare several different ways, so you will want to examine all the available options and make sure coverage begins when your company coverage stops. If you are retiring prior to reaching age 65 you will want to compare your company’s Cobra options with private coverage.

Transitioning to retirement is different for everyone. We have prepared a checklist that should help organize the transition. Please feel free to download the checklist and use it as a guide when you meet with your advisor to begin your retirement journey.

After you have selected your retirement date, there are several tasks you should complete so your transition to retirement is as stress-free and seamless as possible.

A 3-month guide to successfully entering retirement.

Meet with your human resources director to get the following answers:

  • Health Care Options. If you will be 65 or older when you retire you will want to have your HR director give you a Credible Coverage letter showing that you had coverage so that you will not have to pay a penalty when you enroll. If you will retire prior to 65 you will need to understand how your company's Cobra and/or retiree health care works and what it costs. You should also explore alternative coverage options with a health insurance agent.
  • Based on your retirement date, when will your last pay stub be available. This will be used by your financial advisor to determine the amount of withholding you should set for your pension, IRA distributions, and Social Security.
  • Determine when your company retirement plan will be available for rollover. If you are retiring between age 55 and 59 1/2 you should consider leaving some funds in your company retirement plan; you can take penatly free withdrawals from a company plan, but not an IRA, between 55 and 59 1/2.
  • Along with your final paycheck, determine how much you will receive for accrued vacation, sick days, etc.
  • If you company offers a pension plan, have an official pension quote prepared.

Once the above is obtained, meet with your financial advisor:

  • Update your financial plan to ensure your portfolio will generate the income needed from your investments.
  • If enrolling in Medicare at retirement, meet with our firm's Medicare specialist to enroll in Part A and Part B and to discuss Medicare Advantage and Supplement options. Set a date prior to retirement to finalize Medicare.
  • Set a date as soon as possible after retirement to review taxes, set distributions, and rollover your company sponsored retirement plan.

One month prior to retirement:

  • Meet with a Medicare specialist to finalize Medicare options (if you don't have one, give us a call: 303-694-1600).
  • Meet with your financial advisor.
  • Review you retirement income projection.
  • If you have a company sponsored pension, determine the best option for taking it: Lump Sum, Life-Only, Life with Spousal Benefits, etc

As soon as possible after retirement

  • Meet with your financial advisor. Bring your final pay stub and retirement plan statement.
  • Rollover your company retirement plan.
  • Initiate distributions from IRA's and/or other accounts.
  • Submit pension paperwork, if applicable.
  • Set a follow-up appointment three months out to review.

January of year following retirement

  • Meet with your financial advisor.
  • Make changes for increases or decreases in distributions as well as tax withholding adjustments.
  • Review tax expectations for existing accounts.
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