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Timeline to Retirement

Planning for retirement is a lifelong process—not something you do when you hit your 50s. Long-range planning will help you achieve the lifestyle and financial security you desire in retirement. To get ready take these steps:

Dreaming | 10-15 years before | 1-5 years before | Getting closer | Year you retire

At Retirement | Post Retirement | Every year activities  | Every 5 years
 

When retirement is still a dream,

• Think about what you want to do when you retire and do some of it before you retire.

• Start saving or investing on a regular basis.  Set specific objectives and goals.

• When you start working, start thinking about your retirement and set up a filing system for important papers (you’ll be glad you have them later).

• Learn from the retirement planning that your parents or co-workers did/did not do.  Their experience may help you plan for your retirement.

• Review your spending habits; purchase what you need, not always what you want.  This will help you invest for your future.

• Take advantage of payroll savings plans.  Money you don’t see is easier to save.

• Teach your children the importance of saving and investing.

• Put your financial and lifestyle goals in writing; make a plan for your future – including retirement.

• Search the Internet and libraries for information on retirement/life cycle planning. Attend all retirement planning and related informational events that you can.

• Prepare legal documents that protect you and your family, including a will, a health care directive, and an estate planning document.

• Include planning for your long-term care expenses in your financial plans. Because of longer life expectancy, there is a one in four chance that you will need some long-term care as you grow older, and you may not have family available at that time to provide care. Learn about long-term care insurance.

• Explore whether a financial planner would be helpful to assist you in developing plans and setting financial goals.

• Learn about saving and investing: join an investment club, read about it, check the Internet, the library, etc.

• Enroll in or increase your contribution to any employer-sponsored deferred compensation plan, sometimes called 401K plans.

• Examine and pursue any tax advantages available to you.

• Read about and understand your pension plan, investment options and procedures.

• Before requesting a refund of your retirement contribu­tions when you leave a job, review your retirement plan.  If you leave your money in the plan, it will often pay a larger lifetime benefit than what you would get from reinvesting your refund.

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Every Year,

Take These Steps.

• Evaluate your long- and short-term goals and needs. Each pay period, invest as much as you can for retirement.  Each situation is different but this is what the experts say:

  • save 15% of current pretax income;

  • save 10% out of every paycheck; or

  • save 10-12% of your gross income at a minimum.

  • If you start late, these percentages must be increased sharply.

• Keep your filing system up to date.

• Review statements you receive about your private savings and investments for accuracy.

• If your employer offers a match for contributing to the deferred compensation plan, take advantage of it.

• Review  “Your Social Security Statement” you receive from Social Security each year.  Check the annual wages posted to your record to ensure they are correct and match your personal records.  Contact Social Security to resolve any discrepancies.

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Every 5 Years,

Take These Steps.

• Review your retirement plan; explore whether a financial planner might help you meet your goals.

• Review your will, health care directive and estate planning documents, and make any necessary changes.

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Think about what you want to do when you retire and do some of it before you retire.

10 – 15 years before you retire,

Take These Steps.

• Think about how you plan to provide for health care and long-term care coverage when you retire.

• Include planning for your long-term care expenses in your financial plans.  Options to consider may include long-term care insurance, reverse mortgages, private savings, etc.

• Check to see if your employer offers long-term care insurance, or look into an individual policy on your own.  Long-term care insurance will cost you less if you purchase it when you are younger.

• Attend mid-career or pre-retirement sessions offered through your employer or local sources such as commu­nity education, credit unions, or insurance or financial services companies.

• Think about what you plan to do in retirement: start a second career, work part-time or volunteer, travel, study, spend time with grandchildren, etc. Start doing those things.

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Think about what you plan to do in retirement—start a second career, work part-time or volunteer, travel, study, spend time with grandchildren, etc.

1-5 years before you plan to retire,

Take These Steps.

• Determine where you want to live when you retire.  Do you want to move to another state full-time or part of the year, move to another type of housing option or another community in the state, or stay where you are now?  If you want to stay where you are, now is the time to make sure your house is accessible and will accom­modate changes in your health status, e.g., laundry and bathroom on the first floor, wide entries and doorways.

• 1-2 years before you plan to retire, attend retirement sessions or classes offered by your employer, or through community education or other local sources.

• Request an estimate of your benefits from your retirement plans.

• Review your retirement plans–social and financial–and make any necessary adjustments

• Encourage people younger than you to start planning early for their retirement.

• Make sure that you and your spouse or partner are in agreement about all retirement plans, or that you sup­port each other’s plans.

• Update your resume, especially if you plan to work during retirement.

• Explore reduced hours of work to facilitate your transi­tion to retirement.  This will have financial implications.  Check with your human resources office.

• Review your finances including your home mortgage, car, property taxes, etc., prepare a net worth statement and estimate your expenses in retirement.  The amount needed will depend upon your plans for retirement.  Some experts say you will need 70-80% of your current income to maintain your standard of living in retire­ment; others say up to 100%.

• Determine how you plan to provide for health care and long-term care coverage in retirement.

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Encourage people younger than you to start planning early for their retirement. 

As retirement gets closer,

Take These Steps.

• Schedule a physical to check out your health status; your plans may change depending on the results.

• Remember that Medicare covers only part of your health care and the related costs, and does not cover long-term care at all.  Before you are eligible for Medicare at age 65, carefully review the options for providing Medicare supplemental health insurance, including HMOs.  All these options tend to be more expensive than you realize.  Keep in mind that if your employer offers retiree health insurance coverage (fewer and fewer employers are doing this), you may need to apply for that coverage right at retirement or within a few weeks in order to obtain it at all.

• Include planning for your long-term care in your financial plans. If you haven’t already, consider long-term care insurance offered through your employer or individual policies.

• Contact Social Security 3 months before you reach age 62 to discuss starting Social Security retirement benefits at age 62 or at full retirement age, which ranges from 65-67.

• If you plan to work for pay in retirement, check with your pension plans and Social Security to find out about annual earning limits for your age. This means that for every dollar you earn over a specified annual limit, your benefit may be reduced. Right now, Social Security has limits for those who work up to age 65, but after 65, there is no limit on earnings.

• Determine how you will provide for health care and long-term care coverage in retirement.

• Consider whether or not you will continue any life insurance policies in retirement.  This will depend upon the number of dependents you have and other risk management issues.

• Examine and pursue any tax advantages for older persons, e.g., discounts, tax deferrals, tax-free mechanisms.

• At age 60, a surviving spouse who is not disabled can begin collecting Social Security survivor’s benefits.  You can receive a percentage of the amount your spouse would have received upon reaching retirement age. A surviving divorced spouse may be eligible if the marriage lasted 10 years.

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In the year you plan to retire,

Take These Steps.

• Talk with Social Security, your retirement plans, and your human resources office to help you decide the best date for your retirement.

• Prepare a post-retirement budget.

• Notify your supervisor about your plans for retirement.

• Check with your pension plan administrator at least a year before retirement to make sure their records are correct concerning length of employment.

• If there are deferred compensation match or catch-up provisions, take advantage of them.

• About 6 to 12 months before your anticipated retirement date, request an estimate of your retirement benefit from your retirement plans.

• Everyone age 62 and older should contact Social Security in January of the year they intend to retire to discuss the most advantageous month to apply for retirement benefits.  Retirement benefits cannot be paid for any months before the month a person files an application for benefits.  However, in some cases, depending on the individual circumstances, some people might be eligible for monthly benefits for months right before they actually retire or stop working.

• About three months before you reach age 65, you will probably be notified by Social Security that you have been signed up for Medicare – Part A.  If not, contact Social Security to discuss applying for Medicare health insurance even if you have no plans to receive monthly Social Security benefits or if you plan to receive health benefits through an employer.  If you continue to work past age 65 and are covered by your employer’s health insurance or are covered by a working spouse’s health insurance, you do not need to enroll in Medicare – Part B until this coverage has ended.  Individuals who are not covered by such insurance and do not enroll in Medicare at age 65 have to pay a costly penalty added to their Medicare – Part B monthly premium permanently.  These rules can be complicated so check with Senior LinkAge Line® at 1-800-333-2433 for current details.

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Close to or at Retirement,

Take These Steps.

• Review all of your investments and determine when you will start withdrawing funds. A financial planner or a representative from the fund management company can help decide how to do that.

• Review and update your post-retirement budget.

• About 60 days before your retirement date, meet with a retirement plan counselor and complete retirement forms, including which annuity option you plan to choose, verification of birth date, tax withholding, direct deposit, etc.  The retirement application may also be mailed to you.

• Some employees who retire are entitled to a $500 death benefit payable to a beneficiary designated by the employee, if at the time of death the employee is entitled to a pension.  Sign the form available from your human resources office and give a copy to your beneficiary.

• Sixty days before retirement, review your health and dental insurance needs and finalize your plans for cover­age in retirement.  Remember that Medicare does not cover most dental, vision and hearing-related services or devices.

• Review all of your insurance policies for possible reduc­tion or cancellation.  Since you will no longer be com­muting, your car insurance may be reduced. Do you still need life insurance?

• Contact Social Security to get an estimate of your monthly benefits amount, if you do not already have one.  Also make sure you have all the documents you may need when you apply for Social Security benefits, such as a birth or baptismal record, marriage and divorce records, last year’s W-2 or self-employment income tax records, birth records of minor or disabled children, and bank account information for direct deposit of your monthly benefits.

• If you are divorced and your ex-spouse is entitled to any portion of your pension benefits, contact your retire­ment systems and file the appropriate documentation so that your pension benefit at retirement is properly and promptly divided according to the final divorce decree.

• Compile a list of people you want invited to your retire­ment party if you are having one (or people who should be notified that you are retiring).

• Get addresses and phone numbers of people in your work life with whom you want to keep in touch.

• Notify the retirees group at your work place of your address if you want to be invited to their functions.

• Notify any professional groups you belong to about your change in mailing address.

• Start taking your personal items home from your work­space.

• Keep your last regular pay stub, payout stub, union contract, pension authorization letter, or any other work-related paperwork.  Tell your family where the papers are filed.

• Turn in your employee badge, parking card, and any employer-owned equipment you may have.

• Fill out your time sheet and employee expense report for the last time.  Celebrate!

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In the year(s) after you retire,

Take These Steps.

• Cash your first Social Security and pension checks. If you haven’t completed a direct deposit application for your pension checks and want to start direct deposit, call your pension plans for applications.  (All Social Security checks are deposited directly.)

• Encourage people younger than you to start planning early for their retirement.

• If you belonged to a union and retired before the union contract was negotiated, check with your human resources.

• Review the SSA-1099 form sent to you from Social Security which shows the amount of benefits you received in the previous year. You may need this form to prepare your income tax forms.

• When moving out of state, you may need to change insurance plans or other retirement benefit provisions.  Check insurance coverage and legal documents for validity in your new state.

• Notify Social Security and your pension plans of any address changes or changes in your bank records for accounts where your monthly benefits are electronically deposited.  Inform Social Security of any changes in marital status or any changes in the amount of earned income you receive.

• Identify a place where you can have total privacy and spend time there.

• List a dozen things you want to do during retirement (try for 100).

• Enjoy!

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Notice

This document contains information appropriate to do retirement planning in the State of Minnesota.  Readers should note that the legal analysis of any situation depends on a variety of factors, which cannot be properly represented or accounted for on a website.  This information is therefore intended as general information only, and is not intended to serve as legal advice or as a substitute for legal counsel.  The hiring of a lawyer, investment consultant, estate planner, or financial advisor is an important decision that each individual should make, and should not be based solely upon advertisements or general information.

The Minnesota Board on Aging and the Minnesota Department of Human Services is not responsible for any decisions made based on the information provided.  No claim is made to the reliability of information provided.  You are advised to check with the agencies directly to obtain current information before making any decisions.

If you copy or quote from this document, please give credit to the Minnesota Board on Aging and the Minnesota Department of Human Services.

This information is available in other forms to people with disabilities by contacting us at 651-296-4862 (voice) or [email protected].  TDD users can call the Minnesota Relay at 711 or 1-800-627-3529.  For the Speech-to-Speech Relay, call 1-877-627-3848.