# What to do starting 5 years before retiring



## Catlady (Jan 2, 2020)

Wish I had read this before I retired, I was clueless.

https://www.barrons.com/articles/ge...last-day-51577979901?siteid=yhoof2&yptr=yahoo
"Knowing what to do, as well as when to do it to maximize any benefit or correct any problem, can be overwhelming for seasoned savers, let alone those who have been spotty in their planning. Here’s a checklist to get going."


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## Liberty (Jan 2, 2020)

Catlady said:


> Wish I had read this before I retired, I was clueless.
> 
> https://www.barrons.com/articles/ge...last-day-51577979901?siteid=yhoof2&yptr=yahoo
> "Knowing what to do, as well as when to do it to maximize any benefit or correct any problem, can be overwhelming for seasoned savers, let alone those who have been spotty in their planning. Here’s a checklist to get going."


Couldn't access it...guessing you are a "Barron's subscriber"?


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## Liberty (Jan 2, 2020)

What I would like to know is how many of the forum folks here consulted a financial planner before retirement and if their employer encouraged them doing so?


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## Knight (Jan 2, 2020)

My 401k & company pension were handled by Fidelity. We planned with no help for my retirement at age 55 so when I was given the opportunity to retire @54 we were financially ready. Age 59 1/2 I was eligible to begin early withdrawal of my 401k. In talking to Fidelity I learned that my 401k had to be drawn down to zero dollars in 15 years. The same rep I was talking to asked if we needed the money to live on, we didn't.

The advice given was to convert/split the 401k into traditional & self directed IRA's. That was the best advice we received.That way with a wise investment strategy they could accumulate wealth tax free until drawn on.  MRD will last until I'm 128 so in the not to distant future I'm going to increase the withdrawal amount & bite the bullet on the tax increase.

My advice is to check with whatever company administers your account to see if the draw down time table works for you


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## Catlady (Jan 2, 2020)

@Liberty -  I'm not a subscriber, I was able to read it.  I'll go ahead and copy/paste the whole thing.  It's kind of long.

The five years before officially quitting full-time employment is the time to finalize your plan for the next stage in life.

Pre-retirees should start taking a closer look at their financial situation and what actions they can take to bolster readiness—and confidence—as they near their last day on the job.

But knowing what to do, as well as when to do it to maximize any benefit or correct any problem, can be overwhelming for seasoned savers, let alone those who have been spotty in their planning. Here’s a checklist to get going.
*Five years out 
Start building cash reserves*, if you haven’t already, to tap during market downturns in retirement. Experts suggest savings at least equivalent to a year of expenses.


*Take advantage of *post-tax savings opportunities in qualified retirement plans.

Ben Soccodato, a certified financial planner at Barnum Financial Group, notes that employees with access to 401(k) and 403(b) plans can contribute up to $19,500 of pre-tax earnings ($26,000 for people over age 50).

Beyond those 2020 contribution levels, post-tax contributions are possible. The Internal Revenue Service allows for a total of $57,000 in contributions between the employee and employer, which bumps up to $63,500 for people over age 50. A survey by the Plan Sponsor Council of America shows 17% of 401(k) plans offer the option of making contributions on an after-tax basis.

Why put post-tax money in a 401(k)? It’s another way to fund a Roth IRA, he says, which allows tax-free growth if the money is rolled over. However, making a post-tax 401(k) contributions can be complex, so people should both work with their financial advisor and read through the plan summary or other documents to confirm what their plans allow.

*Three years out
Make major purchases* while still employed.

John Campbell, senior wealth strategist at U.S. Bank Private Wealth Management, says it sounds counterintuitive, but look to repair or replace expensive goods with long lifespans such roofs or cars ahead of retirement. “The roof needs to be maintained whether you’re in retirement or not. It really becomes a cash-flow consideration once you get into retirement on fixed resources,” he says.

*For those who might* want to work part time in retirement or turn hobbies into businesses, look into certification programs or other training now.

*Pay off loans from 401(k)s* and other qualified plans to avoid carrying debt into retirement and creating a taxable event which qualifies as ordinary income, he says. Loans from 401(k)s need to be repaid within 60 days of leaving an employer. Whatever isn’t repaid is considered a retirement distribution and creates a taxable event and if you’re not 59½, a penalty, too.

*Two years out
Review estate planning* if not up to date, including updating wills, reviewing power of attorney, health-care proxies, and beneficiaries.

*Decide whether to pay off* the mortgage and review other debts. For people who have debt, plan to stay in their homes, and aren’t concerned about leaving a financial legacy, consider refinancing to a lower interest rate. “If I have 15 years left on my mortgage and I’ve got some credit cards or some student loans hanging out there, maybe it’s an opportunity to package everything up, get into a 30-year loan to improve your cash flow at probably the lowest interest rate environment that we’re going to see for the rest of our lives,” Soccodato says.

*Meet with a financial planner* to review tax strategies and firm up retirement cash flow projections.

Some retirement experts, including Nobel Laureate William Sharpe, say professional advice can be worth the cost even for do-it-yourself types. “When you retire and make your initial decision on buying annuities, investing, and adopting some sort of spending plan, I would think that it would make sense to sit down at least once, at the outset, with a financial advisor,” he told _Barron’s_.

*One year out
Confirm all financial resources*—pensions, profit sharing, Social Security, and other income.

Pre-retirees should call previous employers to see if they have left behind retirement benefits, says Jackie Cooper, a financial fitness coach and executive director of Financial Education Associates.

Cooper and Campbell offered a few ways to hunt for potentially missing benefits, even if a company has gone out of business. For pensions, check with the U.S. Pension Benefit Guaranty Corporation, which maintains an unclaimed-pension database.

For 401(k)s or other qualified plans subject to Employee Retirement Income Security Act of 1974 rules that may have been terminated when the company dissolved, search the U.S. Department of Labor’s Employee Benefits Security Administration; the EBSA maintains a searchable “Abandoned Plan Database”. Pre-retirees may find the name and contact information of the Qualified Termination Administrator, who can be contacted for information on the retiree’s account.


Lastly, check with the state treasurer’s office for any unclaimed property.

*Do a retirement lifestyle* dry run.

Even while earning a paycheck, experts suggest pre-retirees start living on their retirement income to get comfortable with that cash flow. Save any excess cash in liquid assets to build those emergency reserves as needed in a high-yield money-market account or fund, certificates of deposit, or short-term Treasuries.

*Begin conversations with* human resources for formal transition plans if necessary.

*Three months out
Gather copies of all plan* documents including qualified plans, health-savings accounts, medical plans and other information before leaving. Those documents are easier to access while still employed.

*Confirm with human resources* final financial compensation.

That includes getting current information about 401(k), profit sharing and any vested or unvested balances in those plans, Campbell says.

Confirm total vacation and sick leave balance and check the company’s employment policy to see what unused leave may be cashed in at retirement. Check state laws about a company’s requirement to pay these balances.


Ask about the final paycheck: what pay period does it cover, how much will it be, when will vacation and medical leave balances be paid. Pre-retirees who are moving should give human resources their final mailing address to receive W2 statements and other correspondence.

*Pre-retirees with employer stock* in their qualified plans should consider taking advantage of net unrealized appreciation planning to reduce taxes.

Rather than rolling over the entire qualified plan balance into a traditional IRA, first take a lump-sum distribution of the employer stock, and then roll the balance of the qualified plan to an IRA. To take advantage of net unrealized appreciation planning, a retiree doesn’t have to roll the remaining 401(k) balance into an IRA. However, at retirement, an IRA may offer greater investment selection options and planning flexibility that may not be available with a 401(k).

“You would pay ordinary income tax on the cost basis of the employer stock distributed out of the qualified plan. However, you then can sell the employer stock outside of the qualified plan and enjoy long-term capital gain treatment on the gain in the employer stock that exceeds the cost basis,” he says, noting that a qualified advisor can help implement this tax-advantaged strategy.


*Questions? Comments? Write to us at *retirement@barrons.com


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## Liberty (Jan 2, 2020)

Catlady said:


> @Liberty -  I'm not a subscriber, I was able to read it.  I'll go ahead and copy/paste the whole thing.  It's kind of long.
> 
> The five years before officially quitting full-time employment is the time to finalize your plan for the next stage in life.
> 
> ...


Thanks, these seem reasonable things to do.  Of course, as business owners/operators, some of them wouldn't apply, but great to prepare for retirement for the normal person.  Thanks, Cat!


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## Knight (Jan 2, 2020)

A lot of good financial recommendations but missing at least two critical elements.

1. Health.  Prior to retirement how is your health?

2. Do you plan on living in the home you have or relocating or downsizing?


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## old medic (Jan 3, 2020)

My planning for retirement is the main reason I ended up here. and can sign and start collecting now , or continue to build... the plan.


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## retiredtraveler (Jan 3, 2020)

Catlady said:


> Wish I had read this before I retired, I was clueless.
> "Knowing what to do, as well as when to do it to maximize any benefit or correct any problem, can be overwhelming for seasoned savers, let alone those who have been spotty in their planning. Here’s a checklist to get going."


I've written, on several forums and multiple times, that the major thing people do not do is to track their current expenses for a couple of years, then project those expenses on some type of spreadsheet. This is not simply my opinion, I've read any number of times of people's failure to do this and then they're scrambling at the last minute trying to figure out if they can retire.
   The big items are budgeting for travel, car, house repairs (if you intend to stay in a house). You may go years without a big car expense, but sooner or later you're going to be hit with struts, brakes, tranny, etc. with $500-$2000 repair bills. Same with house --- have you planned for the $10000 to put a new roof on? What about general maintenance to house and yard tools? Then, you have to take a hard look at medical expenses and what you think will be covered, and not covered, in retirement.
   You can project these costs if you spend some time recording them before you retire and think about upcoming maintenance items.


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## Liberty (Jan 3, 2020)

retiredtraveler said:


> I've written, on several forums and multiple times, that the major thing people do not do is to track their current expenses for a couple of years, then project those expenses on some type of spreadsheet. This is not simply my opinion, I've read any number of times of people's failure to do this and then they're scrambling at the last minute trying to figure out if they can retire.
> The big items are budgeting for travel, car, house repairs (if you intend to stay in a house). You may go years without a big car expense, but sooner or later you're going to be hit with struts, brakes, tranny, etc. with $500-$2000 repair bills. Same with house --- have you planned for the $10000 to put a new roof on? What about general maintenance to house and yard tools? Then, you have to take a hard look at medical expenses and what you think will be covered, and not covered, in retirement.
> You can project these costs if you spend some time recording them before you retire and think about upcoming maintenance items.


This is a very important post for those wishing to retire.  As we were business owners, this kind of "looking ahead" and planning is a way of life.  We got a full metal roof put on our house, so as not to have those issues to look forward to.  Have known folks that neglected the normal home repairs and then had those issues rear their ugly heads in retirement!

Advice for anyone planning on staying in their homes...get the repairs done now in the right way in a timely manner to provide "safe haven"during your retirement years!


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## Catlady (Jan 3, 2020)

Liberty said:


> This is a very important post for those wishing to retire.  As we were business owners, this kind of "looking ahead" and planning is a way of life.  We *got a full metal roof put on our house*, so as not to have those issues to look forward to.  Have known folks that neglected the normal home repairs and then had those issues rear their ugly heads in retirement!
> 
> Advice for anyone planning on staying in their homes...get the repairs done now in the right way in a timely manner to provide "safe haven"during your retirement years!


Curious, why did you choose a metal roof? 

I read once about a guy in Colorado who had a non-combustible roof on his house (could have been metal) because he said, logically, that when there's a wildfire the embers on the roof can burn the house.  He had other stuff done, like no vegetation near his outside walls.  When a wildfire happened, his home was the only one left standing.  It all makes sense.  Wish I could remember if the house walls were also non-combustible (like block/brick etc).


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## Liberty (Jan 3, 2020)

Catlady said:


> Curious, why did you choose a metal roof?
> 
> I read once about a guy in Colorado who had a non-combustible roof on his house (could have been metal) because he said, logically, that when there's a wildfire the embers on the roof can burn the house.  He had other stuff done, like no vegetation near his outside walls.  When a wildfire happened, his home was the only one left standing.  It all makes sense.  Wish I could remember if the house walls were also non-combustible (like block/brick etc).


Well, in our area a standing metal roof is the gold standard.  We don't (thankfully) have the fire issues parts of California and Colorado have.  Our issues deal more with "water", quite the opposite of fires.  In Colorado, a friend of ours, has mandates that prohibit trees closer than so many feet from his house, due to possible fire spreading .  We have no such issues or mandates here.  Thank heavens. We love trees.   This roof can sustain high winds and never needs repairing or painting.  In fact, it is a lifetime roof.  Especially our lifetime...lol.


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## OneEyedDiva (Jan 7, 2020)

Pretty good article.  It's funny....I can't continue to read articles from Baron's opened from news feeds on my tablet but I was able to read it from your link.


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## old medic (Jan 8, 2020)

we to are going with a metal roof. faster, stronger, last longer and overall cheaper....


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## Butterfly (Jan 8, 2020)

Liberty said:


> What I would like to know is how many of the forum folks here consulted a financial planner before retirement and if their employer encouraged them doing so?



I consulted starting early on with a financial planner about planning for the future and ultimate retirement.

My employer did not give a hoot in a hollow log aout my retirement (or healthcare, or well being, or work/life balance or anything else) except in so far as it affected them.  So no, they did not encourage me to consult a planner.  The employer's interest in their employees extended only to whether said employees were contributing satisfactorily to the employer's bottom line.


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## LeslieAnn (Feb 28, 2020)

Thank you Catlady and Liberty.  I'll copy, paste and save this to by retirement reading


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## Liberty (Feb 28, 2020)

LeslieAnn said:


> Thank you Catlady and Liberty.  I'll copy, paste and save this to by retirement reading


You are quite welcome.. feel free to visit us with additional questions from us "oldsters"...lol.


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## Lethe200 (Feb 28, 2020)

My spouse worked for a state agency and fortunately for us, the pension fund mgmt became concerned that employees were not investing their savings in a sensible growth allocation and did not seem to know much about retirement planning strategies.

In the 1990's pension fund mgmt began a series of free seminars and classes, held in various locations statewide on a regular basis, on all aspects of planning: budgeting, insurance, investing, Social Security, Medicare/Medicaid.

We were in our early forties and immediately signed up for the full range of classes. In fact, the most comprehensive series on retirement planning strategies, we took three separate times! It was so much to comprehend that we felt the first time we probably missed things, the second time showed us that we had indeed missed a few things, and the third time had a slightly different focus that helped expand our knowledge.

The insurance seminar was worth it as it was the reason we now have LTCi policies, managed by the pension fund and a real help in lowering our risk profile. It's a good feeling to know any serious disability/illness will not impoverish the other spouse - and if BOTH of us need care, no worries about running out of money.

In my 50's I went to work for an independent CFP firm and learned a great deal about how the 1% keep their estates intact. They view their professional advisers as a team, and feel that paying for the best advice is well worth it, because it's what you DON'T KNOW that can hurt you. A good financial adviser can teach you not only how to plan for the different stages of your life, they can evaluate your risk profile (especially when life changes happen) and teach you the right questions to ask, in addition to offering their knowledge.

For example, in our most recent meeting with our CFP (not the same firm I worked for, but I was referred to them by my ex-boss), they wanted to discuss how the tax reform laws could give us a one-year tax advantage in a specific situation. We'll be talking to our tax adviser next month to explore this further. It's something we would never have thought of, on our own.

I managed our finances for years, and we did our retirement planning on our own. But we used the risk evaluation skills I learned from working in insurance and banking, and what we learned from the retirement planning classes. I was very pleased that when I interviewed for a job back in 2004 with that CFP's office, he asked me very specific questions about how my legal, financial and insurance matters stood, and he approved of what we had done.


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## Ladybj (Feb 28, 2020)

I think I am the odd one in the bunch.  I did not consult a financial planner prior to retirement.  Things are working itself out for me.  I know I will be AOK.   I have a roof over my head, food, a bed, pillow and blanket, warm when its cold outside, cool in the house when its hot outside.  Keeping my debt to a minimum, have a back up plan God forbid hubby pass away before me.  I informed hubby to check out what his retirement will be if he retired early.  He is still young (58 next month) and do not plan on retiring anytime soon.  When I was young, I lived in a one bedroom house with six siblings and mom made it work and for me, that taught me SURVIVAL.


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## MarciKS (Feb 28, 2020)

Liberty said:


> Couldn't access it...guessing you are a "Barron's subscriber"?


Here's a freebie.
https://money.usnews.com/money/blog...things-to-do-in-the-5-years-before-retirement


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## fmdog44 (Feb 29, 2020)

What is let out of the very smart OP is to decide if you are going to be able to live the retired life you desire. Are you wanting to do a long list of things you have dreamed about or are you going to settle in and be a home body?  Decide if what you think you will have on the day you walk away will be the foundation you need for the life you are about to live and the CFP should be able to help you get there. Avoid surprises in your initial retirement year.


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## Liberty (Feb 29, 2020)

Ladybj said:


> I think I am the odd one in the bunch.  I did not consult a financial planner prior to retirement.  Things are working itself out for me.  I know I will be AOK.   I have a roof over my head, food, a bed, pillow and blanket, warm when its cold outside, cool in the house when its hot outside.  Keeping my debt to a minimum, have a back up plan God forbid hubby pass away before me.  I informed hubby to check out what his retirement will be if he retired early.  He is still young (58 next month) and do not plan on retiring anytime soon.  When I was young, I lived in a one bedroom house with six siblings and mom made it work and for me, that taught me SURVIVAL.


Yes, survival skills are very important.  Necessity is the Mother of invention as they say. You do what you have to do and I do pray they are not being "bred out" of the new generations.


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## CatGuy (Feb 29, 2020)

Liberty said:


> What I would like to know is how many of the forum folks here consulted a financial planner before retirement and if their employer encouraged them doing so?


We started working with a financial planner just before the big meltdown in 2008. He guided us through it successfully, and we were able to pick up some bargain investments that have done very well for us since. We started moving from value stocks to dividend-paying stocks about three years ago, looking to build up a cash reserve of at least 120% of expenses for a year. That's going to come in handy when I retire in a few months, given it's unlikely the market will have recovered fully by then (though you never know).

Employers that offer 401(K) or similar plans do generally advise people to at least use whatever forecasting tools are available through the company managing the plan, but I've never had one recommend finding a planner - we did that on our own.


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## Liberty (Feb 29, 2020)

CatGuy said:


> We started working with a financial planner just before the big meltdown in 2008. He guided us through it successfully, and we were able to pick up some bargain investments that have done very well for us since. We started moving from value stocks to dividend-paying stocks about three years ago, looking to build up a cash reserve of at least 120% of expenses for a year. That's going to come in handy when I retire in a few months, given it's unlikely the market will have recovered fully by then (though you never know).
> 
> Employers that offer 401(K) or similar plans do generally advise people to at least use whatever forecasting tools are available through the company managing the plan, but I've never had one recommend finding a planner - we did that on our own.


Good that you had that needed advice.  Nice to be able to live the lifestyle to which you have become accustomed to and so enjoy in retirement.


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