Five Questions to Consider Before You Retire
If you are in your late 50s or early 60s, you have probably spent years asking one question: "Will I have enough?" For some people who have saved diligently, the answer may turn out to be yes. That is often when a different, harder set of questions begins.
Once retirement appears financially viable, the work can shift from "can I?" to "how do I do this well?" Here are five areas that commonly come up for people at this stage. Any projection is based on assumptions and is not a guarantee of future results.
1. Consider the Emotional Side
Many people who have worked and saved for decades feel guilt, or even anxiety, about stopping, even when their projections support it. Family money habits run deep, and "stop earning" can feel like a risk no matter what a spreadsheet says.
One helpful reframe: if your plan is on solid footing, you may no longer be working out of necessity, and you may be trading time. Working longer may improve your numbers, but it may not be required. The question can become whether the next year of work is worth the year of life it costs.
Timing does not always need to be all-or-nothing. Some people leave right away, some stay through a bonus or a transition, and some move to part-time. Testing your plan against a range of market and spending scenarios can help you choose based on what you want, not what you fear. Projections depend on assumptions, and actual results will differ.
2. Decide How Much of Your Income Should Be Guaranteed
Social Security is the foundation of guaranteed income for many households. One question is whether it, along with any pension, covers enough of your essential expenses to give you comfort when markets fall.
Some people consider adding guaranteed income, such as an income annuity, in place of part of a bond allocation. The goal is not to maximize guaranteed income, but to weigh whether a given level may help cover essential spending, reduce sensitivity to market declines, and make future required distributions and taxes more manageable. Whether this makes sense depends on your specific circumstances.
The tradeoff is certainty versus liquidity. Money used for guaranteed income is generally not available as a lump sum later. Good questions to ask: What exactly gets locked up? What stays accessible? What are the fees, surrender charges, and effects of inflation? What happens if my plans change? Should income continue for my spouse after I am gone, and what does that do to the starting payment?
Annuities involve trade-offs, including reduced liquidity, possible fees and surrender charges, exposure to inflation, and reliance on the issuing insurer's claims-paying ability. Guarantees are backed only by the financial strength of the issuer. Annuities are not right for every situation and should be evaluated against your own goals. If an insurance product is ever recommended to you, we will tell you how we are compensated and any conflicts of interest, which are also described in our Form ADV Part 2A.
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3. Plan for Taxes Across Your Whole Retirement, Not Just This Year
Years spent saving in pre-tax accounts create a future tax liability. Retirement can be a useful window to manage it, particularly in the years after paychecks stop and before required distributions and Medicare-related premium surcharges come into play.
Roth conversions may reduce future required distributions and can leave heirs assets that are generally free of income tax when qualified. However, a conversion is taxable in the year it occurs, can raise your Medicare premiums and other income-based costs, and may require paying the tax from outside funds. Conversions are not always the right move, and other strategies, including guaranteed income, may sometimes reduce the need for large conversions.
Medicare premiums are generally based on income reported two years earlier. Income you report starting around age 63 can therefore affect premiums at age 65, so the timing of conversions and distributions matters. A tax professional can help you confirm how this applies to you.
Consider using available tax room each year. Some households may be able to take planned distributions or conversions that stay within their current bracket. Year-end is a good time to review that capacity with your tax professional, since tax laws and thresholds change.
4. Get Your Legacy Plan in Order
If leaving money to children is important to you, the details matter as much as the amounts.
· Beneficiary designations generally take priority over your will. Individual retirement accounts, employer retirement plans, and annuities pass by designation, outside of probate. Review primary and contingent beneficiaries after any major life change.
· Most non-spouse heirs are subject to the 10-year rule on inherited IRAs, and in some cases annual distributions are also required within that window. Inherited Roth accounts generally avoid income tax on qualified distributions, but must still be emptied within the applicable timeframe.
· A trust may add control. If you want a say in how and when heirs receive money, such as for younger or less financially experienced beneficiaries, talk to an estate attorney about whether a trust fits.
5. Map Where the Cash for Your Goals Will Come From
Home updates, helping a child with school or a first home, travel, and a cushion for health or long-term care needs later in life all require cash, and the source matters.
· Match goals to the right accounts. One-time or discretionary expenses may be better funded from taxable, nonqualified assets than from large IRA withdrawals, for tax reasons and flexibility, though the right answer depends on your situation.
· Treat one-time costs as one-time. In your plan, a kitchen renovation or tuition payment can be modeled as a discrete cash-flow event rather than spread into monthly spending, which can otherwise distort the picture.
· Reconsider long-term care. Some households with a large asset base choose to self-insure, while others use a hybrid or partial policy to hedge the risk. Each approach has costs and limitations.
· Think about credit before you retire. If you may want a home equity line, consider setting it up or confirming renewal terms while you still have employment income, and understand how Social Security or annuity income will be documented later.
A Note on the Logistics
Even a good plan can be undone by a careless step. If you are considering rolling over an employer plan, compare the options first, including fees, investment choices, services, and creditor protections in the plan versus an IRA. If you proceed:
· A direct rollover to an IRA is generally not a taxable distribution.
· Many plans still send paper checks. If your account has both pre-tax and Roth money, you may receive more than one.
· Follow the payee and deposit instructions provided by your plan and the receiving custodian, and confirm them before taking action. Consider sending large checks by overnight delivery with tracking rather than regular mail.
The Takeaway
When a plan is on solid footing, the focus can shift to optimization: income, taxes, flexibility, and legacy, along with the very human question of whether you are ready. The right answers are different for every household, which is why a personalized review matters.
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Important Disclosures
This post is for general educational purposes only and is not personalized tax, legal, or investment advice, nor an offer or recommendation to buy or sell any security or insurance product. It does not consider your individual circumstances, and the strategies discussed may not be suitable for everyone, including Roth conversions, annuities, and trusts. All investing involves risk, including possible loss of principal. Projections and hypothetical scenarios depend on assumptions, are not guarantees, and actual results will vary. Tax laws, thresholds, and Medicare rules change, so verify current rules. Please consult a qualified tax or legal professional before making decisions.