If you’re like most people, preparing for retirement is an exciting time. You may find yourself daydreaming about kicking back, relaxing, and taking it easy for a change. For those who can’t sit still, perhaps it’s time to start pursuing that bucket list you’ve been working on your whole life. No matter how you decide to spend your golden years, taking some steps now to ensure that you are well-prepared for what lies ahead—emotionally and financially—can help you to retire with peace of mind.
For best results, you’ll want to allow 12 months of careful financial planning and research before you collect those goodbye hugs. Below is an outline of the scenarios you should consider as you plan your path to retirement, and a suggested timeframe in which to approach each step.
12 Months Before Retiring
If you haven’t already considered what your finances may look like once you leave your job, now is the time to take a serious look at your investment portfolio, your health care expenses, and any other financial obligations you may have. To plan a realistic retirement budget:
- Make a list of your expenses, both fixed and discretionary. Financial Mentor offers a wide selection of resources, topics, and calculators to help you get a snapshot of your financial situation and where you want to be.
- Determine your anticipated income, identifying how much money will be coming in and from what sources. Try retirement income calculators like the one available at OneAmerica to establish a safe level of spending based on your age and the size of your savings. If the budget numbers don’t work in your favor, you may need to delay retirement by a year or two and continue saving.
- Get familiar with the retirement benefits available to you. If you have a retirement plan with MidAmerica that is funded while you actively work, you can log into your account anytime to review plan details. If the plan is not funded until you retire or separate from service, contact your Human Resources representative for a copy of the Plan Highlights which will explain what benefit is available to you upon retirement.
6 Months Before Retiring
- Research Social Security scenarios to estimate the best time to begin claiming benefits. Holding off until age 70 will mean your Social Security check will be 76% larger than if you had signed on at the minimum eligibility age of 62. If you’re considering taking on a part-time job in retirement, those earnings will impact the amount of Social Security you receive. Postponing part-time work until you reach the full retirement age of 66 will enable you to earn as much as you want, and your benefit won’t be affected. FinancialEngines.com offers a Social Security Income Planner to help you determine your best strategy.
- Do the math on healthcare costs. Analyze your current healthcare needs and project your potential future needs based on your own health history and that of your family. Find out what your employer offers to retirees in the way of medical, life insurance, long-term care, and any other types of insurance coverage. Your employer may provide coverage that is more attractive than anything you could purchase on your own. If your employer offers a Health Reimbursement Arrangement (HRA) through MidAmerica, you’ll have access to money—tax-free—to cover eligible medical expenses during retirement.
3 Months Before Retiring
- Tell your employer. Employers may require a minimum notification time or permit retirement only at specific times of the year, so you’ll need to be aware of these rules.
- Review your investments. If you have a pension plan, understand how it works and what it will pay you. Find out if it pays out in a lump sum or if it’s an annuity and think about rollover options like an IRA. Move investments from volatile stocks into more stable options, such as annuities. You’ll have time to work out any tax implications if you know in advance what your options are. Be sure to note the name of the plan, who the manager is, and how to contact them with questions, since your Human Resource contacts may no longer be an option after you retire.
- Develop a strategy for withdrawals. It’s important to take all sources of income into consideration to ensure that you’re drawing down your assets in the correct order and not creating unnecessary tax liabilities. A financial advisor can help determine how much you should withdraw and from what sources, and then establish a monthly disbursement schedule. A good example is the Special Pay Plan or the Employer-Sponsored Plan, both of which are tax-deferred accounts, meaning you are not taxed until you withdraw the funds. If your tax bracket is lower after retirement, you could potentially save on tax when you withdraw funds from these types of accounts. They allow you to control the timing of your cash distributions as well as the timing of your tax obligations.
- Make plans for your post-career life. Now that business is out of the way, let’s talk about what you’re going to do with your free time! You should have a plan here as well. Perhaps there is a volunteer project you’d like to join, family you want to spend more time with, an exercise routine you want to begin or relaunch, or a dream trip you’ll now have time to take. Find activities that make you feel energized, fulfilled, and appreciative of all those years you worked so hard to get to this point.
You’ve been working hard all these years and now it’s time that your hard-earned benefit dollars work for you. If you have a benefit with MidAmerica, here are some quick tips to get you started.
“JUST RETIRED!” CHECKLIST
- Review your Welcome Kit and Plan Highlights. Once you have officially retired from your employer, we’ll send you a welcome kit and a copy of your Plan Highlights filled with information about your benefit plan. You’ll want to keep this welcome kit. Don’t be tempted to toss it out with the slew of junk mail you receive! This handy piece of knowledge will instruct you on how to access your account online, where to find important forms, how to designate a beneficiary, and how to get in touch with MidAmerica.
- Access Your Account Online. If you haven’t done so already, create an online user account so you can log in and check your account balance, review your investments and transaction history, move and rebalance your funds (if applicable to your plan), and download forms.
- Update Your Contact Information. While you’re logged into your account, you can update your mailing address, email address, and telephone number. Why is this important? We don’t want to lose touch with you just because you’re not working any longer! We may have important information to share about your account, and we’d hate for you to miss out on the educational pieces MidAmerica develops to keep our participants in-the-know about the benefits they have.
For even more help transitioning into retirement, download the full “Just Retired” Checklist by clicking here!
Retirement should be an exciting milestone for you. Fortunately, you have MidAmerica on your side to ensure that this next chapter of your life is fulfilling and maximizes the retirement and health care benefits you have been working towards and can now enjoy. Keep your “Just Retired!” checklist handy at all times