It's time to revisit your retirement planning checklist

In a nutshell

With all that’s happened and continues to happen in the economy, this is a good time to revisit your retirement planning checklist.

• Over the past few years, we’ve experienced a pandemic, seen a stock market boom and bust, historically high inflation followed by high interest rates, and now we find ourselves in a period of solid growth accompanied by a return to stable prices.
• Savers should check their retirement checklists once or twice a year to make sure they are on track with their goals.
• If you don’t have a retirement checklist, or if you made one years ago, this guide will show you what you should be doing in your early career, mid-career, and within 10 years of retirement.

Early career

People in their early twenties who are just starting out up to those in the early to mid-thirties are considered early career. At this stage, your retirement planning checklist might not have that many items on it, but these items are an important foundation for your retirement planning.

Contribute to a retirement plan

This is an important first step on your retirement planning journey. Get in the habit of contributing to your employer’s 401(k), 403(b), 457, or other type of employer-sponsored retirement plan. Contribute something and work to increase the amount of your contribution each year. The biggest advantage young investors have in saving for retirement is time – they have many years to contribute, and there is time for their contributions to compound.

If you are self-employed, consider starting your own retirement plan, such as a SEP-IRA or Solo 401(k). Contributing to an IRA is a good option by itself or in combination with another retirement plan.

Investment selection

Early career retirement savers should generally invest more aggressively. They have time on their side, and they will be more able to weather the stock market’s inevitable ups and downs. Their focus should be more on growth stocks and less on bonds or other lower-risk investments.

Mid-career

Mid-career workers are those in their late thirties to their early fifties. This is a time for more concrete retirement planning.

Contribute to your retirement plan

This is a time when your salary is likely higher, and it’s important to contribute as much as you can to your 401(k) or other employer-sponsored retirement plan. Because you have probably switched jobs at least once, be sure that you pay attention to money from your former employers’ plans and manage these funds properly. Often this means rolling former 401(k)s into an IRA. For those who are self-employed, be sure to contribute to your own retirement plan.

Investment selection

Your investment allocation should still be geared to growth as you have a lot of years to retirement and hopefully through retirement. You may want to invest a bit less aggressively than during your early career years, but this is too early to be overly conservative.

Start thinking about retirement

This is the time to start thinking about your retirement. This includes things like:

• How long do you plan to work?
• What will you do in retirement?
• Where will you live?

While these and other issues are certainly subject to change, starting to think and plan your retirement is important during this stage of your life.

Take an inventory of your potential retirement assets

This involves looking at financial resources that will help you afford retirement, including:

• Retirement accounts such as 401(k) and other retirement plans, IRAs, and self-employed retirement accounts.
• Taxable investments.
• Pensions.
• Social Security.
• Real estate, including your home.
• Interest in a business.

You will want to be sure that you stay on top of these and other potential sources of retirement income from this point forward.

Pay down debt

This is a good time to look at your debts and make a plan to pay them down. This might include student loans, credit card debt, and a mortgage. You definitely want to have your debt situation under control and, ideally, be debt-free or close to it when you enter retirement.

Consider working with a financial advisor

Working with a financial advisor can be beneficial both on a one-time and ongoing basis. This relationship can take a number of forms. You might start by hiring an advisor to put together a one-time financial plan that focuses on your retirement readiness and will show you your retirement strengths and weaknesses.

At some point, you might decide to work with an advisor on an ongoing basis to help with your investments, ongoing financial planning, tax planning, and other issues. The nature of your relationship with your advisor will vary based on your needs and your situation. In all cases, try to find an advisor who is paid for their advice and is not paid based on the commissions from the sale of financial products.

Late career, within ten years of retirement

At this point in time, you are in your early fifties or older. Retirement is literally around the corner, and it’s time to do some serious planning.

Maximize retirement contributions

These are the peak earning years for many people. Make sure you are contributing the maximum to your retirement plan, whether an employer-sponsored plan like a 401(k) or a self-employed plan like a SEP-IRA or Solo 401(k). While you don’t have the benefit of time as you did when you were younger, contributions during this period can still add a significant amount to your retirement nest egg.

Review Social Security

This is the time to review your Social Security statements to understand the benefits you will receive at certain ages and to ensure that your earnings record with the agency is accurate. The latter is critical as benefit payments are based on your 35 highest earning years. You can sign up for an account online and review your benefits and other information.

Investment selection

As you get closer to retirement, your investment selection and allocation become even more important. Investing as you near retirement and as you enter retirement is a mix of balancing growth with reducing risk. You need growth to help ensure you don’t run out of money in retirement, but you want to ensure you don’t get too badly hurt in the event of the inevitable stock market downturn.

Prepare a retirement spending plan

As you firm up what your desired lifestyle looks like, you will need to attach a price tag to it. This is the time to begin putting together a detailed monthly spending plan. How much cash flow will you need to generate each month to support your desired retirement lifestyle?

Take an inventory of your potential retirement assets

Now your financial inventory needs to be as detailed as possible. The goal here is to be sure you understand all potential sources of retirement income available to you. These could include:

• Social Security.
• A pension.
• Income from selling your business.
• Income from part-time employment or consulting.
• Retirement accounts.
• A Health Savings Account (HSA).
• Taxable investment accounts.
• Stock compensation from an employer.
• An inheritance.
• Real estate investments and other alternative investments.

Plan for health care expenses

Many experts cite the cost of health care in retirement as the largest single expense many retirees will face. Be sure you incorporate this into your spending plan and understand how Medicare and other options work.

Devise a retirement withdrawal strategy

This may be one of the most important steps you take in planning for retirement. Look at which accounts and assets you will tap and in what order. There are a lot of variables to consider, such as taxes. Devising the right withdrawal strategy is critically important and can have a significant impact on your ability to support your desired retirement lifestyle.

Revisiting your withdrawal strategy on a regular basis once you retire is important, as things can change over time.

Do a retirement projection and adjust as needed

Create one or multiple retirement projections based on your retirement withdrawal strategy and other sources of income, like Social Security, to compare against your anticipated retirement spending budget. This will tell you if your retirement assets will be sufficient to support your desired retirement spending.

If not, then this is the time to make adjustments prior to retirement. This might mean an adjustment to your spending plan. Or it might mean you will need to work for a few extra years.

Consider working with a financial advisor

If you are not already working with a financial advisor, this is an excellent time to consider hiring one. Retirement planning is complex and involves a lot of variables. A qualified financial advisor can help you put all of the pieces together upfront and help monitor your situation on an ongoing basis. This includes making adjustments to your investments and your overall plan as needed.

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Retirement planning is critical to achieving your goal of a financially successful retirement. It pays to start as early as possible, even if this only entails contributing to a retirement account at first. Your planning needs will evolve over time, and it is important to stay on top of this throughout your working life.