If you’re planning to retire at the end of 2022, congratulations — now get ready to get busy. With less than a year to go and counting, you’ve got more to do than you could possibly imagine in the next 50 weeks or so. With so many T’s to cross and I’s to dot, you’ll have to spread out the load across all 12 months — this article will show you how.
In order to develop a one-year retirement checklist, GOBankingRates consulted with Brad Biren, an elder law and tax attorney who specializes in crisis Medicaid planning through his website iqmop.com, and Steve Sexton, CEO of the Sexton Advisory Group.
You can handle the mammoth task of preparing for your approaching retirement if you spread it out over 12 months. Here’s how.
Start by mapping out the first 365 days of your post-career life.
“Put together a detailed monthly budget, estimating expenses during your first year of retirement,” Sexton said. “Then do the math to make sure you can afford to withdraw from your retirement accounts the amount that you’ll need to fund your spending after accounting for any other sources of retirement income you might have, such as Social Security, rental, pension or dividend income. If you find out your budget comes up short, you have time to rework your expenses or continue to work.”
While the year is still young and the market is still hopefully hot, it’s time to revisit your asset allocation. Traditionally, people move away from growth and toward income investments as retirement approaches.
“Make adjustments to your retirement assets to reduce risk in the overall portfolio and generate income,” Sexton said. “Spend some money on a financial advisor to make sure you understand the risk you are taking, and to reduce that risk while generating the income needed to sustain you in retirement. The last thing any retiree needs is a market downturn putting their retirement income at risk. Many people will add real estate or fixed-index annuities to reduce risk while obtaining the return needed to support their retirement.”
Also while 2022 is still young, you’ll want to strategize about how to enter retirement owing as little money as possible to creditors.
“Identify the debts you are looking to pay down or eliminate and set a plan to pay off those debts before the year ends while you’re still working,” Sexton said.
When spring rolls around, you’ll have one last chance to stuff as much catch-up money as possible into your tax-preferred retirement account — don’t miss the opportunity.
“Maximize contributions to IRAs,” Biren said. “You can contribute more the closer you are to 60 years old. You have until April 15, 2022, to contribute to those IRAs and retirement accounts for FY 2021.”
Now that your last working-years tax season is behind you, it’s time to plan for how much money you’ll withdraw from your accounts when retirement finally arrives — and how much your tax bill will be when you do.
“Collect your refund check and pay a professional to crunch the numbers to determine your required minimum distributions from non-Roth sources to understand your future tax bracket and how to mitigate excess tax losses,” Biren said.
June: Under 65? Plan for Healthcare Coverage Now
If you leave the workforce at full retirement age, you’ll be protected by Medicare. If you were able to retire early, on the other hand, healthcare coverage is your responsibility until you hit the program’s minimum age threshold.
“If you retire before 65, secure your health insurance options to provide coverage to you until Medicare begins,” said Biren, who stressed the importance of meeting with an insurance professional in the summer to avoid the fall logjam when Medicare open enrollment begins in October.
If you have heirs, a trust can make the process of inheritance faster, easier and cheaper after you’re gone. Setting one up can be a lengthy process, so start planning in the summer.
“Consider which assets you would like to avoid going through probate, the process of reading a will and getting court approval for the distribution of bequeathed assets,” Biren said.
August: Plan for the Costs of Long-Term Care
It might seem early to be thinking about long-term care, but Biren said that what you do now could have a lot to do with what you’ll pay for care when the time comes — and keep in mind that every state is different.
“Lean into exploring long-term care options with an insurance specialist that has experience with your state’s long-term care partnership offerings,” Biren said. “Each state under Medicaid must offer a state-subsidized long-term care insurance option. The benefit of this is that it shields more of your income for the future costs of long-term care.”
September: Finalize Your Plan for Taking Social Security
Now is the time to make the incredibly important decision about when to claim your Social Security benefits.
“Determine when is the best time to take Social Security,” Sexton said. “Look at Social Security as an asset. If you receive $2,000 a month inflation-adjusted for 20 years, that’s over $673,000 dollars. Figure out the best time to take Social Security within the context of your retirement to maximize your other assets in retirement.”
The formula is different for everybody. Visit the SSA’s retirement age and benefits adjustment page and talk to a professional before deciding when to claim your benefits. Few choices will have a bigger impact on your post-retirement finances.
If you are old enough to join, October signals the start of open enrollment for Medicare.
“First go to the doctor and ask what medical issues you should think about in the next five years,” Biren said. “Then, if you are over 65, make sure you have Medicare Part B and your Part D options fully funded. Consider a Medicare Advantage plan that covers your medical needs.”
If you’re of retirement age, you should probably have done end-of-life planning before now, but if you haven’t, just make sure that you don’t enter retirement with that box unchecked.
“Plan your estate with an expert who considers different mechanisms, such as wills, trusts, self-settled trusts, insurance, etc., but who also thinks about different life expectancies using actuarial charts,” Biren said.
With all your administrative ducks in a row, it’s time to focus on the most important part of your entire retirement — the space where it will take place.
“Meet with a contractor to rehab your home,” Biren said. “Business is slow in the winter and your home is excludable from Medicaid eligibility calculations, so any necessary fixes or upgrades to your dwelling are not calculated against you by your state.”
Starting retirement with a sound structure, after all, is just as important as starting with sound finances.
“No matter how much money you may need, make sure you at least have a roof over your head,” Biren said.
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