Retirement Planning Checklist: 5 Simple Tips to Help Create Confidence and Comfort in Retirement

Dan Ludwin financial advisor, standing in front of glass conference room windows

April 28, 2018

hand holding a pen, filling out a checklist on a desk

Most people work for a common reason. So that eventually, they don’t have to. That brings us to the Retirement Planning Checklist.

With thousands of financial advisors attempting to help people bridge the emotional and financial gap of working to not working (retiring), there is still tremendous fear and uncertainty. Even with sophisticated mathematics (Monte Carlo, etc.), detailed budgeting and countless discussion, it is often the single biggest financial decision one will make in their life.

We believe there are 5 simple tips that you should do prior to retirement that can help make for a smoother and more peaceful financial transition.

Check out the Retirement Planning Checklist below to help create confidence and comfort in retirement.

Tip #1 = The “What happens if?” game

Ask yourself some very important questions and be sure you are satisfied with the answers/outcomes:

  • What happens for my spouse if I die prematurely and my pension gets reduced or stops?
  • If I outlive my term life insurance policy, what happens?
  • What happens if I, or we, need unplanned health care needs (assisted living, skilled nursing)?
  • What happens if the stock market drops significantly during my retirement?
  • And so on….

Asking these questions can prepare you for the natural fears associated with the transition to retirement.

Tip #2 = Establish a “Retirement Paycheck”

Just like while working, you can’t spend more than you make. Any good financial plan spells out your yearly spending (life, fun, travel, etc.). By documenting and quantifying these cash flows into yearly spending expectations, you should know how much your investment accounts will “owe” you for each year’s spending.

In addition, establish 2 forms of distribution from your investment accounts:

  • Monthly deposit to your checking account to cover traditional monthly ongoing expenses.
  • Ad Hoc (On Demand) ability to deposit your checking account to satisfy inconsistent spending needs (travel, real estate taxes, etc.)

Tip #3 = Set aside the leaves that fall from your money tree

I always joke that my spouse thinks we have a money tree in our backyard. Let’s imagine that we do, and it is made up of all of our investments. The beautiful thing about most trees is that the leaves fall and then regrow each year.

Let’s consider the leaves that grow and fall to the ground as the dividends and interest that many investments distribute throughout the year. As you enter retirement, the first thing we suggest you do is run around and scoop up all of the leaves (dividends and interest) that have fallen to the ground.

Put those leaves aside to help subsidize your retirement spending. By collecting the fallen leaves, you are less prone to have to climb a ladder and trim the tree branches (your principal) and this process allows the tree to continue to grow and hopefully create more leaves in the future.

Tip #4 = Adaptive spending

How do you avoid getting in an accident while on cruise control driving on the highway?

  • Be aware of your surroundings.
  • Don’t go too fast or slow relative to other cars or the speed limit.
  • Be willing and able to speed up or slow down. What is the first thing we do when we see brake lights in front of us? We take our foot off the gas and start to slow down.

The same can be said for retirement spending habits. Be aware and adaptive with your spending.

Tip #5 = Emergency Cash Reserve

Just like when you were working, it was important to keep 3-12 months’ worth of cash reserve. Just in case of an emergency. We believe it is even more important to maintain that emergency fund while retired. The worst thing that can happen in retirement is being forced to sell things at lower prices to fund retirement cash flows.

Retirement Planning Checklist Next Steps

These helpful tips can prepare you for the natural fears associated with retirement. While there is no perfectly smooth retirement road, these ideas can help you navigate through the potholes and detours of volatile markets and unpredictable life events.

DisclosureThis information is intended for educational purposes only and should not be construed as advice. You should discuss your circumstances with a qualified financial professional prior to making any decisions.

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