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Your retirement checklist: What should be on it?

Planning for retirement is important for people of all ages. It becomes increasingly important as you grow older. While most people generally understand that they should save money for after they retire, most do not save enough. Following a retirement checklist can help you to reach your goals.

CNBC reports that people who are between the ages of 55 and 64 have a median savings of $120,000. That is only 12 percent of the amount that experts say that people will need when they retire. At the same time, people are living longer, which means that their savings will have to stretch for more years. Creating a formal  retirement checklist and following it can help you to ensure that you have enough savings so that you can retire more comfortably. You should start long before you plan to retire by creating a pre-retirement checklist.

Retirement planning: an introduction

Intro to retirement planning

Retirement planning involves more than putting money in your company’s 401(k) or in a traditional IRA and thinking that everything will work out once you retire. Planning should involve considering the myriad issues that people face as they age. You will want to decide whether you will want to live in retirement communities or to age in your current residence.

You can use a Social Security retirement estimator to get an estimate of how much you might expect to receive. You should create a retirement checklist and follow it throughout adulthood. Some of the topics that you should consider when you are planning for your future and thinking about your checklist for retirement include the following:

  • The age that you want to retire
  • How much you will need to save
  • Potential tax issues after you retire
  • How Social Security and Medicare might factor in
  • Your insurance needs
  • How you want to handle your estate
  • Potential long-term care needs
  • Family needs

Retirement statistics and what they tell us

Investor’s Business Daily  reports that experts recommend that people should have at least seven times their annual salaries saved by the time that they are 55. If a person makes the median salary in the U.S. of $57,617, this means that he or she should have at least $403,319 saved by age 55. As was previously noted, however, the median savings of the 55 to 64 age group in the U.S. is only $120,000.

Many people have far less in savings. If people do not do more to save, plan for when they will retire, or follow a checklist for retirement, they risk being financially uncertain during their golden years. Some people will be unable to leave the workforce and be forced to continue working long past the time that they would have wanted to retire.

What is the goal of retirement?

Your goal for after you retire should be to make sure that you have maximized your savings in the most tax-advantaged way. When you follow a retirement checklist, this can be easier. This can help you to make certain that you will have enough to live on even if you live to be a centenarian.

Your goal should take into account your own needs, the needs of your family members, whether you want to live in retirement communities, and the likelihood that you might need long-term care. You should take time to understand how these different needs can have an impact on the amount of savings that you require.

What is the average age of retirement?

In the U.S., the average age at which people retire is 61. However, the average age at which people retire varies from state to state. Young people between the ages of 18 and 29 believe that they will retire by age 63.

However, that is younger than what is considered to be standard by the SSA, and the average expectation of Americans overall is that they will retire when they reach age 66.

What do I need for retirement plan?

How much will I need to retire?

Experts recommend that you should have a minimum of 20 times your annual salary saved for retirement. The minimum recommended amount to have in savings is $1 million, but some experts believe that even $1 million may not be sufficient.

Your life expectancy, health concerns, long-term care needs, and other needs will all play a role in determining how much you should have saved by the time that you retire. For a very rough estimate, you can simply multiply your annual salary by 20, but you should understand that the estimate will be a minimum that may not represent everything that you will need to have set aside. Here is what you should include on your retirement checklist. If you complete all of the steps, you may have enough saved to retire on time.

1. Do an inventory of assets and analyze and track your net worth

The first step that you should take on your retirement checklist is to inventory all of your assets and conduct an analysis of your current net worth. You should keep track of your worth as it changes over time.

Your goal should be to continue increasing your worth through savings and the elimination of debt. Assessing the value of your assets and your true worth can give you a baseline from which you can work from. If you know where your starting point is, it will be simpler for you to create a retirement plan with steps that can help you to realize your goals.

2. Eliminate debt and spend less than you earn

Once you know what your current worth is, the next step on your retirement checklist is to eliminate your debt.. You should make a plan to repay all of your debts without adding new debts.

In addition to paying off your debts, you should also write a budget that allows you to spend less than what you earn. You should then plan to move the excess money into your investments for when you retire. If you want to retire at the U.S. average age, plan to live about 10 to 15 percent below your means and dedicate the excess portion to your investments. If you want to retire early, plan to live well below your means with a goal of investing 30 percent of your income.

3. Set aside ample funding for emergencies

It is important for you to save and to set aside at least three months of your income in an emergency fund. This money should be easily accessible, meaning that you might want to put it in a high-interest savings account or a money market account rather than a traditional IRA or other account that you will not be able to readily access.

When you retire, having an emergency fund available can be important. There can sometimes be delays in when your pension plan or Social Security will kick in. Your emergency fund can help you to make ends meet while you are waiting.

4. Take care of health insurance

It is important for you to consider your health insurance needs after you retire. You will want to learn about how Medicare works and the supplemental policies that you might need. The average amount that people spend on their medical retirement expenses is between 11 and 16 percent of their after-tax incomes.

One important thing to note is that Medicare does not pay for long-term care. Likewise, most private health insurance policies also do not pay for long-term care.

You might want to investigate long-term care insurance, long-term care assistance that might be available to you through the VA if you are a veteran, and life insurance policies that have a long-term care rider.

Retirement plan income

5. Assess all retirement income sources

The next step that you should complete on your retirement checklist is to assess all of your sources of income that you will have after you retire. These sources might include your SSA benefits, any pension plan that you might have, your investments, your IRAs, a 702 j retirement plan, your 401k, and other sources.

You can use the Social Security retirement estimator by going to the Social Security Administration’s website and using the retirement calculator. The Social Security retirement estimator can help you to get a rough idea of the amount that you might receive from the government.

When you are thinking about your financial planning checklist, you also need to take the time to understand the tax implications that you might face with your retirement income. For example, savings held in IRAs and 401(k)s may be taxed when you begin taking withdrawals.

If your tax bracket will be higher after you retire than it is now, it might make sense for you to consider completing a rollover into a Roth IRA and paying the taxes now instead of later. The key is to become an expert on the withdrawal of funds so that you are able to keep more of your money.

6. Complete a retirement budget and plan

After you have analyzed your sources of income after you will retire, you should create a realistic retirement plan and a retirement budget. Your retirement budget should take into account your retirement expenses as well as money that you might need for the things that you want to do.

A good plan should contain financial goals and a needs assessment. You should set your financial goals so that you can meet your needs after you retire. Then, you can create a budget and track your expenses. Use the government SSA retirement calculator by going here.

7. Based on your goals, create and implement your investment strategy

The next step on your retirement checklist is to create and implement your investment strategy based on the goals that you have identified. This will include an identification of your risk tolerance and knowledge of the different investment options that you have.

Contribute to one or more accounts, such as a 401k, a Roth IRA, a 702 j retirement plan, a 403(b), or a traditional retirement account. Aim to contribute at least 10 percent of your income. Contribute a higher amount if you are trying to catch up your savings.

Diversify your investments and choose investments with lower fees. As you grow older, you should change your risk profile and optimize your portfolio. Make certain that you revisit your retirement checklist on a regular basis. You can make adjustments to your pre retirement checklist as time goes on and your needs change. Sticking to your retirement checklist can help you to ensure that you will be ready to retire when the time comes.

8. Create an estate plan and update it as needed

The last step on your retirement checklist is one that you might want to complete while you are young and then change as you experience major changes in your life. Even young people should have a strong estate plan in place. Estate planning allows you to have control over a number of important decisions, including the following:

  • The medical care that you will receive if you are incapacitated
  • Who will have the power to make health care decisions for you if you are incapacitated
  • Who will be able to make important financial decisions for you if you are incapacitated
  • How you want your assets to be handled after you pass away
  • Who you want to receive your assets once you pass away
  • How to minimize estate taxes
  • Avoiding probate

It is a good idea to meet with an estate planning attorney even if you are still young. Having a plan in place can help if you happen to be in an accident and need decisions to be made for you if you are unable to make them yourself. The plan for your estate should be revisited on a regular basis and should be updated whenever you experience major life changes, including the following:

  • Marriage
  • Divorce
  • Birth of a child
  • Blended family
  • Death of a loved one
Retirement planning with M1 Finance

How M1 Finance works

Investing through M1 Finance can help you to stick to your retirement checklist without having to overthink your investments too much. You can open an account and choose the investments that you want in line with your risk tolerance.

Investors are able to set up automatic transfers to fund their accounts. When money is deposited, it will automatically be divided between the chosen investments in the relative weights that you have assigned to each one. Portfolios on M1 Finance are automatically rebalanced so that you can make the most money in a tax-advantaged way.

Benefits of M1 Finance?

When you invest through M1 Finance, you can choose from a variety of different types of investments. You can choose from an individual investment account, a joint account, retirement account, or a trust account. Investors are able to create their own custom portfolios or to choose expertly created portfolios for their risk tolerance levels.

M1 Finance has received great reviews and has been profiled in national publications such as Barron’s. The brokerage does not charge any fees or commissions, which means that your investments can grow even more. You can start investing now or call us at 888-714-6674 to learn more.