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Financial Plan for Retirement: The 7-Step Checklist


Everyone deserves to be able to retire and welcome that rewarding chapter after working hard for so many years. Planning for this chapter can help you maintain your quality of life in the future. It reduces tremendous stress down the road, like solely relying on Social Security or continuing to work.

In this blog, Highlands Community Bank will share tips for making a plan for retirement and the best practices for financially preparing for this time.

  • Step 1: Understand Your Retirement Goals
  • Step 2: Assess Your Current Financial Standing
  • Step 3: Estimate Your Retirement Expenses
  • Step 4: Create a Retirement Budget
  • Step 5: Manage Your Retirement Savings
  • Step 6: Evaluate Healthcare and Insurance Needs
  • Step 7: Estate Planning and Legacy Considerations

Step 1: Understand Your Retirement Goals

Think about what your goals are for this period of your life. Some folks settle down by a lake or become a beach bum, while others may want to move closer to their loved ones. Consider where you’ll live short-term and long-term. Do your research on what achieving these goals could entail so you’re not hit with any surprises. Ask yourself these questions:

  • What do you want retirement to look like for you?
  • Are there any bucket list items you want to check off?
  • Are there any big purchases you want to make? (i.e., antique car, boat, beach house)
  • Do you want to devote more time to a passion of yours?

Opening a traditional Individual Retirement Account (IRA) is an easy way to fund these goals. A traditional IRA is a retirement account that allows you to direct pre-tax income toward investments that grow tax-deferred. The money in a traditional IRA isn’t taxed until you withdraw funds from the account. A 401k plan is traditionally drawn from your gross income and later reduces your taxable income based on your contributions. Many employers automatically enroll their employees in a 401k plan to streamline this process.

Step 2: Assess Your Current Financial Standing

Review your current financial standing, including your sources of income, expenses, debts, assets, and investments. Factor in the amount of money you’ll need to retire. This would be an excellent time to come back to your goals.

Prioritize debt repayment (i.e., auto loans, mortgage) so achieving those goals is more feasible. Then, it would be best if you tried to estimate your retirement income needs, future expenses, and potential income sources.

Step 3: Estimate Your Retirement Expenses

It’s very important to prepare for the unexpected. It’s strongly recommended to build an emergency savings fund. This is a type of savings account in which the money goes untouched unless you’re facing a medical or family emergency that could cause financial hardship.

Experts recommend saving at least three months of living expenses in this account. When building your emergency savings, consider putting extra money aside if you need full-time care. You may want to research extended care options, so you have an idea of what it could cost.

Step 4: Create a Retirement Budget

Think ahead about what your income will be when you retire. You can use an online benefits calculator to better understand what you may receive each month from Social Security.

But, also think about if you may have any additional sources of income such as passion projects, your investment portfolio, etc. Factor these in so you can get an accurate estimate. Then, plug them into a budget to determine how you can confidently spend the money you’ve accumulated! We have a handy budgeting worksheet that can guide you in creating the perfect retirement budget.

Step 5: Manage Your Retirement Savings

They say having a plan is half the battle. The other half comes down to strategy and execution. Think back to the goals you thought of earlier and any essential expenses. With those in mind, you can determine when the best time may be to access your 401k or IRA.

Remember that early withdrawals should only be reserved for emergencies. Often, withdrawing money from a plan before the plan’s average retirement age could cost you an additional 10 percent in income tax as a penalty.

Step 6: Evaluate Healthcare and Insurance Needs

Your insurance needs may change come your retirement. Medical and homeowners or renters insurance are must-haves to help you cover your bases.

Most people 65 and older are eligible for Medicare, but it doesn’t cover all medical costs. So, shop around. If you plan on working a part-time job or gig in your retirement, you may be able to get benefits through your job.

If you plan to move to a new location, you may need greater coverage to protect against the elements. Just know your options. You might want to speak with a financial advisor to help strategize how to cover those expenses in the long run.

Step 7: Estate Planning and Legacy Considerations

It’s a good idea to devise a strategy for using funds from your taxable and tax-deferred accounts. Many tax experts suggest withdrawing from taxable accounts, tax-deferred accounts, and finally, IRAs, where withdrawals are tax-free. Theoretically, this should allow your tax-deferred assets to grow over time.

Finally, you may not want to think about estate planning, but it can save you and your loved ones time, money, and strife later on. An estate plan should include your will, beneficiary designations, guardianship designations (if applicable), health care power of attorney, durable power of attorney, and a personal letter of intent. This can be cumbersome, but you don’t have to handle that all on your own. You can discuss with your loved ones about your wishes and also use a local accounting firm to help you form a solid plan.

Highlands Community Bank is Here For You

You are not in this alone. We strongly encourage you to consult with a financial advisor or retirement planner for assistance in creating your roadmap to retirement. Our team at Highlands Community Bank can guide you along the way through your financial journey.

We’d be happy to recommend any useful banking tips or products for your unique circumstances. Highlands Community Bank is pleased to offer traditional IRAs and multiple savings options with excellent interest rates. To learn more about our investment services, call us or visit a branch near you.

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