Money Talk: Must-do items to tackle as you head into retirement

When approaching retirement, it is normal to worry about having regular paychecks stop, and to have concerns about losing connections built at work. Sure, there are plenty of us who will be more than happy to leave work and its social connections behind, but in either case, having a good plan in place for both the financial and social aspects of life after work will make this transition much easier. Here are a few items that should be on everyone’s pre-retirement checklist.

The first step is to get a good handle on what your living expenses will be in retirement. Hopefully, you have already been working from at least a rough budget and have a sense of how those expenses might change after you stop working. There will be some work-related expense that will disappear like commuting costs, retirement plan contributions, and payroll taxes, so you will likely need less than your current income in retirement, but there may be some other lifestyle goals you want to accomplish like being able to travel. If you have a working budget, dust it off and have a frank conversation with your spouse, or with yourself if single, about where your spending priorities will be in retirement. Getting control of expenses from the start will leave you with more flexibility when the inevitable market downturn or unexpected expense comes along.

With a budget for living expenses and other goals established, you should assess the resources you will have to fund these outlays. Start by getting a handle on guaranteed income streams that can be turned on in retirement. Some will have an employer pension available. It is important to get an estimate of how much monthly income the pension will provide and to evaluate its payout options. The default for a married employee is usually a joint and 50% survivor payout, but this may not be ideal for everyone and there may be many alternatives to consider that offer varying amounts of monthly income. Social Security will be the guaranteed income stream for most retirees. This income will also vary depending upon when it is claimed. Be sure to review a Social Security benefit estimate to understand the size of this benefit at your full retirement age. You can claim benefits early, but the amount will be permanently reduced. It is also possible to increase your Social Security benefit by waiting to collect. For each year the benefit is delayed, the amount increases by eight percent until it hits a maximum at age 70.

Since some retirement expenses will likely be funded by retirement account withdrawals, it is important to evaluate your investment mix, particularly in the years just before and just after retirement. Over the long-run, inflation is a retiree’s worst enemy because it erodes the purchasing power of their nest-egg. Beating inflation requires investing at least some of a retirement portfolio in stocks. As we know, stock prices can be volatile, so the general thinking is that a worker’s investment mix should become more conservative when approaching retirement to guard against something called “sequence of returns” risk. This is the risk that poor returns early in retirement make it difficult for a retirement portfolio to recover from a market downturn if the retiree is also taking withdrawals. Poor returns later in life have less of an impact so it makes sense to enter retirement with a lower allocation to stocks, then increase the stock allocation later to help the portfolio overcome inflation’s impacts. Ideally, asset allocation is reviewed and repositioned a couple of years before retirement, then potentially repositioned a few years into retirement.

Health care can be a significant expense for retirees, so it is important to understand how Medicare works in terms of when to sign up and its options for coverage. Medicare eligibility starts at age 65. It is important to enroll on time to avoid late enrollment penalties or a gap in coverage.

Finally, be sure to evaluate your insurance coverage as your needs have undoubtedly changed. For example, life insurance death benefits may be less important since as no one is relying on your ability to earn income anymore. If you have a life insurance policy that will require premiums to be paid during retirement, consider whether this policy should be dropped or converted to a long-term care policy.

David T. Mayes

David T. Mayes is a CERTIFIED FINANCIAL PLANNERTM professional and IRS Enrolled Three Bearings Fiduciary Advisors, Inc., a fee-only advisory firm in Hampton. He can be reached at 603-926-1775 or

This article originally appeared on Portsmouth Herald: Money Talk: Must-do items to tackle as you head into retirement