HOW TO RETIRE: A Retirement Transition Checklist

By | June 24, 2016

Like me, you’ve probably been dreaming of retirement.  Maybe your picture includes travel to places you’ve never been before or just being able to relax with no stress.  But now, you are wondering how to retire: what are the steps to make retirement a reality?  This retirement transition checklist can be a great resource for you as it set out some steps to help you retire successfully. Refer to this preparing for retirement checklist often and remember retiring is a process, not something you jump into quickly.

  • Steps 1 – 5 will help you think through your needs and preferences as you prepare to retire
  • Step 6 describes what to do in the final months before you retire.
  • Refer to the Age Milestones for important information to consider at each milestone.

Step 1: Set a Target Retirement DateSet a Retirement Date

Having a goal in mind is a good start.  Are you specific enough that you have an actual date in mind, or are you targeting a specific age (based on some of the milestones later in this article)?  In either case, having a plan and preparing for that is where you should begin and then plan from there.  While your date may change over time, having an approximate time frame set out will help you with your “exit strategy” to ensure a smooth transition.

Step 2: Determine Your Retirement Expenses

What does your future look like? Where do you plan on living? Will you work part time, travel the world, start a hobby, downsize and move into a condo?  Start dreaming now what your retirement will look like, and make sure you are in agreement with your spouse, if applicable.

Compare your current budget with what you might need in retirement, and create a retirement budget.  As a rule of thumb, people generally spend about 85% of their current budget in retirement. Start by applying this statistic to your current budget, and make adjustments from there.

One budget line item that many times changes drastically is health care.  Generally speaking, your employer will no longer be paying the cost of your insurance premiums, and even if you are receiving Medicare as your only source of coverage, there are out of pocket and non-covered treatments to be aware of.  According to Fidelity’s Retirement Health Care Cost Estimate, a healthy couple retiring in 2015 at age 65 should expect to spend $245,000 on health care throughout retirement, up from $220,000 in 2014.

Step 3: Estimate Your Income in RetirementRetirement Income & Expenses

What are your sources of income?  Social Security benefits are available (see Age Triggers later in this article).  You can visit to learn how this benefit works and how much you are eligible to receive, as well as how to activate payments.

What other retirement income sources do you have in your retirement portfolio?  You can choose how you want to receiving this income from your retirement accounts based on the amount of risk you want to assume, how flexible or liquid you’d like your money to be, etc.  It is probably in your best interest to meet with your financial advisor to help you navigate this step.  They can help you evaluate if you are, indeed, preparing yourself appropriately, in light of your Step 1 and 2 goals.

Some of the sources to include in your retirement portfolio: IRA accounts, previous employers’ retirement plans, spouse’s retirement assets, spouse’s pension, rental income, part-time work income, etc. Many estate planners would counsel you to consolidate your investments into one place and allocate your assets with the help of a financial planner familiar with the market so as to boost your retirement savings.

Step 4: Draft A Retirement Plan

Depending on when you retire, keep in mind that people are living longer all the time.  The life expectancy tables are shifting, and you will want your income to last for your entire retirement, perhaps 30 years or longer. Again, a financial advisor can help you review your expenses against your income, and ideally, your lifetime income will match necessary expenses. Note that if your income is less than your projected expenses, you might choose to work another year or lower your expenses.

Step 5: Put Your Estate Plans in WritingA Plan to Care for Your Loved Ones

Estate planning is not just for the rich and famous.  Everyone should have their wishes reduced to writing.  Not only does it give you a basis to follow, it can help ensure your dependents or heirs are aware of your plan and taken care of financially in the event of incapacity or death. Estate planning includes creating a Will and possibly even a Trust, as well as establishing beneficiary designations on all assets.

  • A will enables payment of final debts and expenses and the orderly distribution of assets upon death.
  • A durable power of attorney generally authorizes someone to act on your behalf during your lifetime for purposes of financial affairs, but take note that upon death, the “power” of that power of attorney ceases.
  • You will also want to protect yourself and your loved ones with a health care power of attorney that authorizes someone to make medical decisions on your behalf in the event of incapacity.
  • Be sure to designate and update, if necessary, your beneficiaries and designees

Step 6: Activate Your Retirement Plan

You should be in touch with your financial planner and/or holder of your benefits at least three months in advance of your retirement date so that you have time to complete and return required forms.

Activate Social Security if you plan to receive Social Security at retirement by contacting the Social Security Administration for the necessary paperwork to file for your payments. It is always wise to consult an attorney as you consider your situation, especially in light of state law differences.

Activate alternate health insurance coverage, if before age 65, and if you are retiring at age 65 or after, you will be covered by Medicare.   Enroll in Part A (hospital) and B (medical services) by contacting your local Social Security office. If you elect to have secondary coverage, send that insurance company a copy of your Medicare card.

Follow these steps, and you’ll transition smoothly and confidently into retirement. You should review your retirement plan yearly to make sure you are still on course.  Many factors can come into play that may require a readjustment of some kind to keep your portfolio healthy.  Enjoy this phase of your life, knowing you’re making wise choices to steward your health financially, physically, and emotionally.

Age Milestones to Consider

What age are you now?  After reviewing the foregoing checklist, refer to these target dates to help you in your planning process.  Where you find yourself in this milestone list may help you determine how best to be preparing for retirement.  This is a progressive list, so it should apply to you for many years.  At any age, if you consider yourself behind in saving for retirement, consider developing an extra income stream to help prepare for retirement.

Age 25

Ask yourself, what does my retirement portfolio consist of.  Yes, truly ask yourself this because now is the perfect time to begin good habits of saving that will benefit you in your later years.  Investing wisely at a young age may even insure you can retire while still young enough to enjoy it.

Age 30

Are your student loans paid off?  If not, make every attempt to get them paid off quickly so that you can put more aside for retirement savings.

Age 40

Don’t have a mid-life crisis, you’ve got this!  While your own student loans are not a thing of the past, you are likely facing the reality of your own children’s needs for help with college tuition.  While how much you help them is entirely your own decision, remember not to totally give up on your own retirement savings.

Age 50Milestones for Transitioning to Retirement

If you’re at the half-century mark (or over) at the end of the calendar year, you get some extra help in retirement savings department.  You can make “catch-up” contributions to both 401(k) plans and individual retirement accounts. In 2016, the catch-up contribution limits are $6,000 for 401(k)s (increasing the total 401(k) limit to $24,000) and $1,000 for IRAs (increasing the total IRA contribution limit to $6,500).  Rules relating to catch-up contributions are complex and plans provisions may differ.  Contact your plan administrator accordingly.

Age 55

If you have planned well and are able to retire early, at the milestone age of 55 you can begin making penalty-free withdrawals from your 401(k) plan.  What – you say – I thought that 59-1/2 was the magical age?  Technically, yes, so be careful.  Also keep in mind that you are going to miss out on the growth you would have accumulated if you had not withdrawn these amounts.

Here are some of the criteria:  this only applies to ERISA-qualified, employer-established, defined-contribution plans such as 401(k) and 403(b) plans. You also must have worked for your employer until you reached at least 55. You can’t retire at, say, 53, wait two years, and then take advantage of this exception.

Age 59½

Just before you reach the big 6-0, you can begin making penalty-free withdrawals from 401(k) and IRA accounts. If you are still working and have a 401(k), you’ll need to check with your plan administrator to see if it allows what’s called an “in-service” withdrawal.  Although there is no penalty, income tax will still be due on each distribution.

Age 62

Now you are eligible to begin receiving Social Security benefits.  This is earliest age you can elect to begin.  Take note that your benefits will be reduced if you begin receiving them now, as opposed to what they would be if you receive them at your “full retirement” age.  This reduction is roughly 30%, depending on your year of birth, so think through this decision and make the choice that is best for you and your situation.   Also take note that if you are still working while receiving Social Security benefits, part or all of your benefits could be withheld.

Age 65

This is a very significant milestone! You can now sign up for Medicare and receive your health care benefits at a fraction of the cost of private insurance.  You can sign up as early as three months before your 65th birthday.  Be careful to sign up on time (or within eight months of leaving a job with group health coverage), otherwise your Medicare Part B and D premiums could permanently increase, and you could possibly be denied supplemental coverage.

Secondly, if you were born before 1943—congratulations – you’ve reached FULL retirement age!

And finally, if you have a health savings account, you have reached the age where you can withdraw funds from that account for non-medical reasons without paying a penalty!

Age 66 or 67Your retirement plan may include salsa dancing

If you were born between 1943 and 1959 – you reach FULL retirement age at 66, meaning you can receive unreduced Social Security benefits.!  For those born 1960 or later – your big milestone is age 67.  Congratulations – you have made it to full retirement age!

Age 70

Your milestone here is that you have now reached the age where Social Security benefits will no longer increase.  So if you were trying to maximize your Social Security payment, your time is now, and you can begin receiving the maximum payment you are entitled to.

Age 70½

At this age, the required minimum distribution (RMD) kicks in with respect your requirement accounts.  Each company represented in your retirement portfolio will set the minimum amount you must withdraw each year.  This RMD can be set up in monthly increments or in a yearly lump sum, but it must be taken during each calendar year.  This is the minimum you must withdraw from pretax 401(k), IRA and other retirement accounts.  Note, however, this RMD requirement does not apply to your Roth retirement accounts.

Getting ready for retirement is a process.  We all want that transition to retirement to be smooth and stress-free. Hopefully these steps and age milestones will help you in doing just that – preparing for smooth sailing into retirement.


2 thoughts on “HOW TO RETIRE: A Retirement Transition Checklist

  1. Louis

    Hi Dana,

    I’m not yet 50, but have been thinking about retirement plan all the time as I know it’s just too late to plan anything when it comes to the actual retirement age. I guess I just missed out one thing is the estate planning as you mentioned in your article. I’ll need to put it in my plan, especially I don’t plan to have any kids. I need to ensure my stuff are being taken care of and not bringing any troubles to anyone.

    Thanks for your sharing


    1. Dana Hagstrom Post author

      Glad to hear you’re thinking ahead to retirement and beginning to do some planning. A financial planner can help you make sure you’re on track. Best wishes!

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