You have been thinking about, saving, and planning for your retirement for decades. Retirement can mean freedom from the demands of a job, but will only be true freedom if you are prepared both financially and mentally for the shift. As you reach the final years before retirement – ensure you are ready by following this checklist below so you can confidently make the retirement decision.

Plan your health care coverage

Now that you are no longer covered under an employer’s health care, you will need to sign up for coverage  on your own.

If you are 65, you will be covered by Medicare, the federal government’s health care insurance system. You can start the process of signing up to three months before your 65th birthday, so start early. Be aware the Medicare doesn’t cover everything and you may need to purchase a Medicare supplemental policy to plug the holes in the coverage.

If you retire before 65, you will have to find private health care until you qualify for Medicare. The healthcare market has changed significantly over the past 5 years. Make sure you find a local resource that can help you choose the right coverage options for you. There are a wide range of coverages from basic to Cadillac plans, so make sure to do your research and know what kind of plan you would like before you announce your retirement date.

If you enroll in a plan through the Health Insurance Marketplace you may be eligible to receive a tax credit to lower your monthly health insurance premiums.  The tax credit is based on your estimated income and household information. This may help lower your monthly cost on health care coverage.1

It is estimated that the average couple will spend about $280,0002 on health care in retirement, excluding the cost of long-term care. Make sure you have considered that expense when evaluating your retirement budget.

Determine your Social Security benefits

You have worked for 30+ years and have been paying in the Social Security system, but do you know how much you are eligible for in benefits? The Social Security Administration (SSA) no longer sends out an annual statement of benefits, but you can find out your benefits amount by going to and establishing an account. The SSA will provide information about how much you are eligible if you file at 62, your Full Retirement age, and at 70.

The longer you wait to take Social Security the higher your benefit will be.

If you file at age 62, your benefits could be reduced as much as 30% from your Full Retirement Age benefit.

If you file at Full Retirement Age (FRA), benefits won’t be reduced for wage earning.

If you are able to wait past your Full Retirement Age (FRA), you will get a guaranteed 8% annual increase in benefits for every year you wait until age 70.  You are eligible for your maximum benefit at age 70, which is the latest you would want to file. When you file will depend on your ability to fund your retirement needs from savings and also your life expectancy. If you have the ability to fund your retirement budget through savings and have a good longevity in your family history, it may make sense to wait until 70 to receive your maximum benefit.

If you are married, you are eligible for benefits based on your earnings history or 50% of your spouse’s benefits. If you did not work outside the home and you are married, you are still eligible for 50% of your working spouses benefit.

Set a budget

As you are planning for retirement, make sure you know how much it will cost you to live on an annual basis. Even if your house is paid off you will still need to cover things like property taxes, insurance and upkeep. Make sure you factored in a buffer for the unexpected leaky basement or broken air conditioner. If you have had a full time job for more than 30 years, you probably have had a schedule of eating at home and have had a fixed amount of vacation time.

With retirement, comes freedom, which can also mean more time to spend money. Many people want to take longer trips, spend a couple of months down south, or buy an RV to travel the country – make sure you have factored that into your budget and that your finances can handle those larger expenses.

Determine where your monthly paycheck will come from

Without a regular paycheck, you will need to determine where your retirement spending will come from. Social Security and savings are the main sources for most people, although some are lucky enough to have pension plans from their employers.

First, determine how much your fixed income will be, whether from pensions or Social Security, and then determine how much more you will need to fund your lifestyle.

You may have many buckets to pull from in retirement – Roth IRAs, Traditional IRAs, or taxable investment accounts – all of which will have different tax implications when you start withdrawing. The more you take out of your Traditional IRA accounts, the more income you will need to report on your tax return. If you choose to take all of your spending needs out of your Traditional IRA, it could cause you to pay a higher percentage of tax than you planned so make sure you are planning your withdrawal strategy appropriately.

Remember at 70 ½, you will have to start taking money out of your tax deferred retirement (Traditional IRA, 401(k), 403(b)) accounts.  The IRS allowed you to save this money tax deferred all of these years, which is a great incentive to save. That incentive expires at age 70 ½ when they require you to take money out so they can start collecting tax. The amount, which is called a Required Minimum Distribution or RMD, will depend on the balance of your tax deferred accounts and your age. The older you get, usually the more you have to take out of your account. There is a 50% excise tax on the amount required but not taken, so be sure you are taking those distributions when appropriate.

Find hobbies

You have spent your working years, well, working. Maybe you have spent those years raising kids, maintaining a home, taking care of aging parents, and still working full time. That doesn’t leave a lot of time for friends, hobbies, volunteering, and passions. If retirement is on the horizon for you and you haven’t been able to keep up with those hobbies over the years, spend some time figuring out what you want to do with your retirement. Maybe it is joining a gym and meeting a group there a couple of times a week? Possibly it is volunteering at the church? Or perhaps it is taking up woodworking with all of those tools you have in the basement?

You will no longer have the daily interaction with co-workers, so you will need to find other ways to make social connections and to fill your time. If you are ready to fill your newfound free time, the easier the transition into retirement will be.

Ready to retire in 2019?

Once you have set your retirement budget, know that you can afford to retire, and have your benefits in place, you can start thinking about putting in your final notice. It is OK if you aren’t there yet, use this checklist as your guideline to make sure you are prepared for the next chapter of your life.

Retirement is a time to choose what you want to do, so make sure you are prepared and then put your feet up and enjoy.


This is intended for informational purposes only and should not be construed as personalized tax or financial advice. Please consult your tax and financial professional(s) regarding your unique circumstances.

Author Sarah E. McGinniss Financial Advisor / Market Manager

Sarah earned a bachelor of science degree in finance from the University of Illinois, where she graduated as a top 10 student in the College of Business and a top 100 student in the university.

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