What, Me Retire? Follow this Checklist to Decide if You’re Ready

by Marc Bastow | March 6, 2013 8:55 am

My wife just celebrated a birthday and I’m just three short weeks from doing the same, which means we’re both that much closer to retirement.

Or are we?

“Retiring” is one of the great conundrums of modern life. We all talk about it, we all try to figure out what it might actually mean, and we’re all a little terrified of the reality.

A colleague’s father is in the same boat — trying to decide if, when, and how to retire. It’s not an easy decision, as you have to consider lots of variables. Amid all the advice heaped upon us[1] in trying to plan for retirement, perhaps a sanity check is in order before we utter the words, “I’m retired.”

Let’s try to keep this simple with a three-part checklist that asks a number of questions, before we get to the nuts and bolts of “official” retirement:

1. Am I Mentally Ready to Retire?

How old are you? As I’ve cautioned before[2], you don’t have to be in that much of a hurry.

How is your health? Medicare and medicaid can help, but you’ll probably be better off if you do get ill if you’re employed with a healthcare plan.

Can you work if necessary? Finding that retirement job might just save you both mentally and financially — so take a good look around to see what’s available to avoid being a “New Unemployable[3].”

Is your spouse retired, too? Hey, not every spouse wants their significant other hanging around all day, so you better make sure everyone is on board.

What is your residential status? Do you own, or rent? Do you plan on selling for the cash or to downsize? Do you plan on moving anytime soon, perhaps to a more tax-friendly state[4]?

What am you going to do tomorrow? Make sure you have at least some plan — “nothing” is a bad answer.

2. Am I Fiscally Ready to Retire?

Check your latest SSA statements: We’ll get more specific about Social Security later, but these give you some idea of how much is coming your way.

Similarly, check any and all pension statements — you have to know how much is coming in monthly.

How much is in your IRA account? You’ve been planning for this moment for a long time with contributions, and at some point you will take required minimum distributions[5], so how much do you have? Remember, too, that IRA distributions are taxable.

Review your 401k status and plans. You can manage this one on your own or get some help[6], but in either case understand how much is in there and what’s coming out, since distributions are taxable. Do remember that unlike IRA monies, you are NOT obligated to tap 401k funds.

Income from all sources: Now that you’ve done all the homework above, how much is coming in on a monthly, quarterly and annual basis?

With the income side accounted for, now it’s time for the expense side. Get to work on determining the balance between the two.

And it might be a bit macabre to suggest, but now might also be a good time to check on your estate plans. Make sure whatever money you anticipate having left over is going to whomever or whatever you want.

3. What’s Next?

First things first: If you are 65, you MUST — by law — apply for Medicare. Don’t cringe, that’s actually a good thing. It might be a bit confusing given all the rules and paperwork, but it’s ultimately good since it helps to pay for your medical expenses.

Next up is Social Security. You can get all the information you need from the best source available: the Social Security website[7]. The site offers an up-to-date calculator model that will tell you how much you can expect in Social Security benefits at any age.

And make no mistake: You can retire at any age you want. But you can’t collect benefits until age 65, so really, what’s the hurry? Once you turn 65 and make the decision to take the benefits, you will 1) let your employer know you are retiring, 2) make sure your spouse is still happy about the decision, and 3) officially fill out the application on the SSA website to start receiving your benefits.

Really, wasn’t that all pretty easy after all? Now sit back and enjoy your well-earned retirement.

I’m sure I’ve missed plenty of questions, so feel free to shoot me an email or comment below.

Marc Bastow is an Assistant Editor at InvestorPlace.com with no plans to retire anytime soon.

Endnotes:
  1. all the advice heaped upon us: http://investorplace.com/2013/02/4-ways-to-fight-off-retirement-troubles-on-the-horizon-afl/
  2. I’ve cautioned before: http://investorplace.com/2013/01/planning-to-retire-at-55-please-think-again/
  3. New Unemployable: http://investorplace.com/2013/02/avoid-becoming-a-new-unemployable/
  4. tax-friendly state: http://www.kiplinger.com/slideshow/retirement/T006-S001-10-most-tax-friendly-states-for-retirees/index.html
  5. required minimum distributions: http://investorplace.com/2012/12/4-dividend-stocks-for-your-ira-distribution-money-nwl-flo-glw-bgg-leg/
  6. get some help: http://investorplace.com/2013/03/i-need-a-financial-advisor-right-goog-yhoo/
  7. Social Security website: http://www.ssa.gov/

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