Retiring is a momentous occasion. After working for decades, you may be looking forward to living at a more leisurely pace. Whether you want to travel, spend more time with family, or pursue your hobbies, your years of planning and saving will soon pay off.
If you’re planning to retire in 2022, it’s time to make some final preparations. Keep reading to learn the most important steps to take now as you wrap up your career and begin the retirement you’ve been building towards.
Retirement Checklist for New Retirees in 2022
1. Review Your Insurance Coverage Options
Health care is often one of the biggest costs for retirees. Accounting for those expenses is critical, and that includes your plan for health care once you leave your job.
Thanks to COBRA, you’re entitled to continue your existing employer-sponsored health plan after retirement. But you’ll have to pay the entire premium, and you can only use the plan for a limited time. Another option is to purchase individual health insurance from an individual provider or your state-run marketplace.
People who retire after turning 65 are eligible for Medicare. While every senior has access to standard Medicare coverage, there are optional plans to fill in some of the gaps. Look into these beforehand to find the coverage that suits your needs.
2. Front-load Retirement Account Contributions
Unless you’re retiring on January 1, 2022, you can still contribute to your retirement accounts before leaving your job. Front-loading your contributions to the beginning of the year will allow you to contribute the annual maximum for your accounts, even if you only plan to work part of the year.
Additionally, you might be eligible to make catch-up contributions above the normal limits. If you can afford to stash the extra money away, catch-up contributions let you pad your retirement accounts and reap tax benefits at the same time.
3. Know Where Your Living Expenses Will Come From
Retiring eliminates the obligation of work that many of us associate with adulthood. Sadly, another reality of adulthood - the drudgery of paying bills - continues on. It’s common for retirees to have multiple sources of income. There are a few key factors to consider when deciding which ones you use for your living expenses:
- Required Minimum Distributions - Most retirement accounts, both individual and employer-sponsored, are subject to required minimum distributions. Factor these into your monthly income, since it’s money you’ll need to pull out of your retirement regardless.
- 401(k)s and IRAs - If you have more than one retirement account, they probably have different pros and cons. Before you decide which account(s) to use for living expenses, calculate how long your assets will last based on periodic withdrawals. Then, consider how the tax triangle can help maximize your savings.
- Social Security - Social security benefits are a reliable and secure stream of income. While deferring them can be beneficial for some people, others may need to begin collecting as soon as possible. Use the Social Security Administration’s online calculator to estimate your benefits.
4. Rollover Your 401(k)
When it’s time to leave your job, you’ll need to decide what to do with your 401(k). You could leave it in place and collect monthly distributions, but it’s usually more advantageous to do a 401(k) rollover into an IRA. Combining all your retirement contributions into an IRA provides more control, flexibility, and tax benefits.
If you have a pension plan rather than a 401(k), make sure you understand your payout options before you retire. You can still rollover to an IRA, but the process will be a bit different. Talk to your plan’s administrator for details on receiving either a lump sum or a monthly annuity.
5. Begin Building Other Types of Wealth
Preparing for retirement means more than just having enough money in the bank. There are other types of wealth besides financial, and all of them are key to a successful retirement. As you get ready to leave your job, have you considered how you’re going to spend your time? Will you maintain your social circles and/or form new ones? How will you remain active - both physically and mentally - to stay in good health?
Putting the Final Touches on Your Retirement Plans
If you’re in the final months or weeks before retirement, now is the time to put the finishing touches on your long-term financial plans. After years of saving, you don’t want too much of your hard-earning money going straight to taxes, especially when it doesn’t have to.
If you need help making sure you have everything in order, consider working with a fiduciary advisor. They’re legally obligated to act in their clients’ best interest, so you can rest easy knowing their only goal is to ensure you get the help you need to prepare for a secure retirement. The right financial advisor will also consider your lifestyle goals, plans, and dreams for retirement.
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