As you near retirement age, it is paramount that you plan accordingly with important steps for that final year before you retire.
Hopefully, by this point, an effort has been made to pay off debt and eliminate as many lines of credit as possible.
At one year from retirement, follow this guide to take the guesswork out of the process.
Review your investments.
Preserving your savings is the name of the game here. If you aren’t using a managed account option that will automatically adjust your investments, switching to a more conservative investment approach may be appropriate. At this point, your Target Date Retirement Account would become a Target Retirement Income Account — which means it has reached its final investment allocation. Your funds continue to be invested but the fund allocation is no longer changing once you reach the target age.
Be sure to review everything, including savings and all sources of retirement income (bank accounts, stocks, etc.).
Know your income sources.
Think in terms of when you want to start drawing from Social Security, your defined benefit plan, (403(b), 401(k)), etc. If you have a gap between how much you have and how much you will need, does it make sense to delay retirement? If longevity runs in the family, should you delay receiving your Social Security benefit? Must you rely on income from other retirement savings accounts, or can you afford to delay the commencement of all benefits?
Inventory your expenses.
There are two types of expenses that you will need to account for:
- Fixed expenses—Expenses that occur every month, such as mortgage, real estate taxes, food, medication, car payment, insurance, etc.
- Discretionary expenses—These can be controlled and vary from month to month, such as vacations, dining out, gifts for holidays and birthdays, hobbies, etc.
Determine your retirement needs. Develop a list and track expenses from month to month to determine your needs at retirement.
Six months from retirement
Let your employer know.
While there is nothing set in stone about this, six months out is a good time to let the human resources department and management at your place of employment know about your retirement plans. Giving your company this much notice ensures that they won’t be caught off guard at the last moment and gives them ample time to arrange for a smooth transition. Your company’s human resources department also can start to get the ball rolling to account for any unused vacation time or personal days you have earned, and the payment options for your benefits.
Track down all your records for retirement accounts and savings you have accumulated over the years and review your service record so that you can correct any mistakes before reviewing benefits.
Three Months from Retirement
Contact Social Security.
You can start to receive your Social Security benefits at any point from age 62 until age 70. Delaying benefits will increase the amount you receive each month, but if your plan is to start receiving retirement benefits at the time you retire, now is the time to begin the process at www.socialsecurity.gov.
Sign up for Medicare.
Regardless of at what age you are planning to retire or if you are planning to stay on with your company’s group health plan, you still need to sign up for Medicare at age 65. It is important to remember that there are three enrollment periods when you are eligible to sign up for Medicare:
- The Initial Enrollment Period (IEP) is the first window when you can enroll in Medicare. The IEP is seven months long, starting three months before the month you turn 65, continuing through the month you turn 65 and then for another three months after that.
- The Special Enrollment Period (SEP) is when you can sign up if you skipped enrollment when you were first eligible because you were covered by an employment-based group health plan. If this applies to you, you can enroll in Parts A & B during the following periods: – Any time when you are still covered by the group health plan – During the eight months after either employment or group coverage ends (The eight-month period starts after whichever of those ends first.)
- The General Enrollment Period (GEP) is when you can sign up for part A or Part B if you did not during the IEP and are not eligible for a SEP. The GEP lasts from January 1 to March 31 of each year. If you don’t enroll in Medicare medical insurance or prescription drug coverage when you’re first eligible, coverage can be delayed, and you may have to pay a late enrollment penalty for as long as you have coverage. If you are retiring after age 65 and have not signed up for Medicare, you have eight months to join after leaving work before the premium increases kick in. You will get Medicare Parts A (hospital coverage) and Part B (doctor visits and outpatient care) automatically. You can reject Part B if you do not want to pay the premium for it. Part D (drug coverage) is optional. Sign up for Medicare at www.socialsecurity.gov/medicare.
One month from retirement
Make a list of questions.
Be sure to ask your employer if you have filled out all the paperwork that will be needed in order to retire. Ask them about when you can expect to receive your first check.
Make a timeline.
Be mindful that you do not have to start drawing from all your retirement funds at once. Make yourself a timeline to help you forecast when you will draw money from different accounts. Be sure you have enough money set aside from the time you leave your company until you begin receiving your checks. If you can, consider using your 401(k), 403(b) or IRA for unexpected and reoccurring expenses like car insurance, real estate taxes and medications.