Getting Ready to Retire Checklist for Executives and Professionals

As an executive or professional, preparing for retirement is what you’ve been doing since the day you started contributing to your first 401(k) or 403(b). It’s been the defining financial goal of your career. Now that it’s almost here, are you sure you’re ready? What actions should you be taking to determine if you are?

According to the financial experts, these are the five steps executives and professionals need on their Getting Ready to Retire Checklist: 

  1. Decide if retirement is really what you want

More and more executives and professionals are finding retirement to be a gray area in recent times. In 2016, the Pew Research Center reported more Americans are continuing to work past age 65 than ever before. The majority of these older workers are staying on in management roles.

For some, continuing to work may be an act of necessity – the cost of living is only going up and with it that of health care – but for the majority of retirees, continuing to work is a choice willingly made. Your career has been the central focus of your life until now. Don’t be surprised if you find yourself less willing to let it go than you anticipated.

Before you move forward with your pre-retirement planning, ask yourself if full retirement is really what you want right now. Are you willing or able to continue working? If so, perhaps adjusting your hours or switching to a consulting role would be preferable to full retirement. Knowing your willingness to continue working could become a bargaining chip in the severance negotiations to come.

  1. Get the right retirement package

According to The Wall Street Journal, “When it comes to executives’ careers, the biggest financial mistake they make often comes at the very end, when they’re negotiating—or renegotiating—a retirement package.” Common mistakes include letting yourself get blinded by large lump-sum payout offers, being inflexible and failing to compromise.

When faced with the offer of a six-figure check, it can be hard to say no. The higher your role and salary, the larger that lump-sum payout is likely to be. Remember whatever sum you’re being offered has to last for the rest of your life. When you divide the offer by 20, 30, or even 40 years, how much are you really receiving?

If your company seems hesitant to raise their offer, try to understand why, Jayme Meredeth, vice president and financial analyst at Hefren-Tillotson, told The Wall Street Journal. It may not be the dollar amount that’s giving your company pause so much as the impact such a large one-time payout will have on their bottom line. Some companies are more comfortable providing larger overall payments if you’re willing to receive them in smaller installments over time, such as in the form of an annuity. Similarly, consider the other benefits that may be available to you beyond the cash.

According to RiseSmart’s 2017 Guide to Severance and Workforce Transition, the majority of companies with standard severance packages offer retirement benefits and over 50% offer a form of health benefits continuance or COBRA. Companies are continuing to expand their benefits offerings to include services such as retirement and financial planning, stock options, and disability benefits. The likelihood of your receiving these additional benefits depends on your role within the company. Executives are the most likely to receive additional benefits with managers and professionals not far behind.

When it comes to negotiating, remember it’s about compromise. If you want a benefit that your company isn’t willing to provide, find a way to make it worth their while. For instance, you could offer to stay on as a consultant or mentor to your successor. The question is which is more valuable to you: your time or the benefit? At the end of the day, the key to getting the right retirement package is knowing what you’re going to want and need going forward.

  1. Determine what your retirement will look like

Now, more than ever, it’s essential for you to have a clear understanding of what your retirement lifestyle will be. The good news is it’ll be easier to determine than ever before because you’re standing on the threshold of that new lifestyle.

Think hard about how you’re going to spend your time once you leave work. Vague ideas such as “traveling” or “visiting the grandkids” won’t cut it anymore. It’s time to get specific. Does travel mean annual trips to Europe or every other weekend in Florida? What will you do between those trips to Europe or Florida? Where will you live? Are you thinking of moving or downsizing your home? Downsizing could provide an extra cushion to your next egg, but may also mean a heavy tax burden the year of the sale.

Your focus as you envision your life in retirement should be on determining your future cost of living. John Grable, University of Georgia professor of financial planning and co-author of The Process of Financial Planning, says retirees should expect to see their retirement expenses rise and fall in a U-shaped curve. In other words, there will be a dip in your expenses as you settle into retirement (i.e. as you stop having to commute to work and dry clean your clothes), but expect your expenses to rise again as the cost of medical care increases in later years.

Where you get medical insurance and how much it’s going to cost you is another important consideration. (Hint: Your severance package could be a good place to look.) At 65, a man who retired in 2015 would need roughly $68,000 in savings to have a 50% chance of covering his medical expenses throughout retirement, according to the Employee Benefit Research Institute. A 65-year-old woman would need savings of $89,000 to have the same probability of covering all of her health expenses. For a 90% chance of covering all health expenses in retirement, those numbers rise to $124,000 or $140,000 in savings for a 65-year-old man or woman, respectively.

  1. Build a financial plan and stress test it

Once you know your anticipated expenses, it’s time to determine which assets will cover them. Take stock of the sources of income available to you in retirement. How much income will each source be able to provide and how long will it last?

For supplemental income, consider turning to your hobbies. If you have a particular skill or knowledge base, you can leverage it for additional income in retirement. This doesn’t necessarily have to be in your career field. Even teaching music lessons a couple days a week would help slow the drain from your retirement savings. It could also enable you to delay when you begin claiming Social Security benefits.

The later you begin taking Social Security, the higher your monthly benefit payments will be. There are a number of online calculators you can use to help determine the best age to start claiming your benefit. For example, this one by AARP will show you the income you’ll receive at various claiming ages.

As you look at your sources of income, make sure you’re looking at after-tax income. Remember that income from traditional retirement accounts and Social Security is taxable. Your tax bracket may also change going forward, depending on how much income you take each year.

Once you’ve built a financial plan, a financial professional can help you stress test your portfolio to ensure you’re taking on no more risk than necessary.

  1. Find a financial planner you can work with until death do you part

Perhaps the best thing you can do for yourself and your retirement is to find a financial expert who can help you navigate the road ahead.

For many professionals, their investment portfolio has been designed with the end goal of retirement in mind. What happens after that date comes? How should your investment portfolio change once you retire?

You’re now planning for the “rest of your life” and perhaps even beyond if you have a spouse. The rest of your life is a vague goal to plan for, though. Unlike with retirement, when you could say, “I want to plan to retire at age 65,” none of us knows how long we’ll live. And yet this is a key determinant of how much you need to have saved.

Working with a financial or actuarial advisor can help you clarify your timeline and financial plan. He or she will become a pillar and guide for you throughout the years to come. 

For executives and professionals, getting ready to retire is an exciting yet daunting task. Retirement has been the biggest financial milestone of your future for so many years, now that it’s here, it can be hard to know which steps to take next. Following this retirement check list will put you on the path towards a relaxing and financially secure “rest of your life.”


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