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Preparing for retirement checklist: Are you retirement ready?

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Reaching an age and financial position where retirement may be possible is a blessing. You know you have important decisions to make in the years and months leading up to this meaningful goal. You want to make sure you accomplish key preparations on schedule so you can live out the retirement dreams you've envisioned.

Once you've decided when you want to retire, it may help you to go through this preparing for retirement checklist in addition to talking with your financial advisor. This guide explains what steps can help you get ready so you can feel confident you're on the right track.

Preparing for retirement checklist

Our planning for retirement checklist starts with reviewing your income sources. Then, you'll take inventory of your expenses. With your income and expense information, you'll formulate a retirement budget. Finally, you'll create a contingency plan.

Let's discuss each step in more detail.

1. Plot out your retirement vision

Whether it's traveling, spending time with grandkids, or taking up new hobbies, it's important to think about how much you may need to save to cover your retirement lifestyle.

According to Thrivent’s Retirement Readiness survey, 20% of the retired survey respondents noted they are concerned that they underestimated the money needed for basic living expenses. Another 15% wished they had dreamed bigger while planning for retirement.

Ask yourself these questions to start thinking about how you will use your money:

  • How many years are you planning for?
  • Where do you want to live?
  • What passions might you pursue?
  • How will you spend your money?

Include your partner or spouse in the conversation so you both can be on the same page.

2. Develop a strategy for timing your Social Security benefits

Social Security benefits can form the backbone of your retirement income. If you've earned Social Security retirement benefits from your own earnings record or a spouse's, set up a Social Security account and receive an estimated benefit from there.

You'll also want to work with a financial advisor to evaluate your options for when to start claiming Social Security. It’s a complicated decision, and the timing in which you claim benefits can make the difference in thousands of dollars.

Consider these key factors:

  • Age. Your full retirement age is 66 or 67, depending on when you were born. Claiming Social Security before your full retirement age gives you a smaller monthly payment. Claiming after full retirement age, but no later than age 70, gives you a larger monthly payment.
  • Estimated life expectancy. If your grandmother lived to 102 and your mother lived to 98, you may follow in their footsteps. Claiming later and getting a larger monthly payment might be appropriate. If you have health issues, claiming earlier might make more sense to maximize your lifetime benefits.
  • Other income sources. If your total assets are on the lower side, you might be better off with an early claiming strategy.

3. Review your personal savings & retirement income sources

After you have a decent sense of your Social Security income, you can see how your personal savings and income sources can fill any gaps. Begin creating or updating your personal or household balance sheet by taking an inventory of your assets, including your savings, investments, pension, annuities and any other forms of retirement income, such as money from side gigs or part-time work. This worksheet can help you get started.

Depending on this tally, you may look back at your timing for claiming your Social Security benefit. If you anticipate some spare savings to live on before taking Social Security, this could give you a chance to further maximize your benefit.

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What retirement income plan fits your risk tolerance?
Thrivent’s 10-question IncomeMatch® assessment provides insight into your retirement savings strategy while keeping your priorities and values in mind.

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4. Prepare for the tax implications of your retirement income

It's important to know not only how much you have accumulated but also how income taxes may affect your withdrawals.

For example:

  • 401(k)s, traditional IRAs and certain other retirement accounts have required minimum distributions (RMDs) that are taxable and must begin by a certain age.
  • Roth IRAs do not have RMDs, and qualified distributions from them are not taxable.1
  • Your Social Security benefit may be taxed. However, the amount of tax owed—as well as whether you even owe tax at all—depends on a variety of factors. Read more.

You can aim to diversify your assets so your tax liability doesn't hit all at once. You could consider tax-efficient strategies that spread taxable events across three key buckets: tax now, tax later and tax never, to ensure you don't have to pay more taxes than necessary at any point in time.

A tax professional or financial advisor can help you plot out your assets into the appropriate buckets. While Thrivent does not provide specific legal or tax advice, we can partner with you and your tax professional or attorney.

5. Test your numbers with a retirement calculator

With the potential income figures now in hand, enter those numbers into a retirement income planning calculator. This can help you work through different scenarios to find out if you're on track.

In particular, the tab labeled "Investment returns, inflation and Social Security" can help you see how long your nest egg might last under different market and economic scenarios. These situations are based on the inputs you provide under the first tab about your existing retirement savings, current income, current savings rate, years to retirement and retirement length.

You might learn that:

  • You're on track to have plentiful savings in retirement regardless of the market.
  • You need to save more aggressively ahead of retirement to meet your needs.
  • You're able to retire earlier or later than you thought.
  • You're able to give more generously than you thought.

The insights you gain from the calculator can help inform your conversation with your financial advisor.

6. Make a plan to offset the risks to your retirement savings

Many retirees find that managing their retirement income is often more challenging than saving for it. That’s likely because as you deal with your income and expenses over time, you must continuously adjust to account for hard-to-predict factors like:

  • Outliving your money.
  • Volatile financial market performance.
  • The impact of inflation on your purchasing power.
  • Changing tax laws.
  • Health challenges or other unplanned life changes.

These things can collectively have a significant impact on your retirement income—both on the amount of income you can generate annually and your lifestyle. A thoughtful plan that accounts for these risks can help you better prepare to weather the storms of uncertainty.

7. Work with a financial advisor to piece it all together

A financial advisor can walk through your plan and show you situations you may not have considered. They also can help you create budget projections for each phase of your retirement.

For example, your financial advisor might set up several situations to see how your numbers would play out:

  • Your most likely scenario.
  • The most likely scenario but with much higher or lower healthcare costs.
  • A scenario where an adult child needs significant financial support.
  • A scenario where you buy your dream home.
  • A scenario where you downsize or move somewhere with lower taxes.
  • A scenario where everything that could go wrong does.

Your contingency plan likely will include details around preparing for unexpected events, securing guaranteed income, planning for health care costs, the potential for market volatility and more. These all offer ways to cushion yourself against a rough landing and make your savings last.

Get professional guidance

Hard work and support from others have led you to retirement's doorstep. Whether you're looking forward to spending more time with loved ones, getting more involved in local community groups or just enjoying a more leisurely pace of life, taking the time to go through a preparing for retirement checklist can help make the journey into your golden years a smooth one.

For expert guidance on customizing and executing your plan, bring your checklist when you meet with a Thrivent financial advisor, who can point out ways to maximize your retirement plans based on your individual situation and goals.

1 Distributions of earnings are tax-free as long as your Roth IRA, Roth 403(b) or Roth 401(k) is at least five years old and one of the following requirements is met: (1) you are at least age 59½; (2) you are disabled; (3) you are purchasing your first home ($10,000 lifetime maximum); or (4) the money is being paid to a beneficiary.

Thrivent financial advisors and professionals have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.