Retirement Planning Checklist

The most important steps to take in planning for retirement.

Making a retirement checklist can be the most important piece of retirement planning you can do before leaving the workplace, especially if you plan to retire within five years.

A 2005 survey uncovered the actions that more than half of the retirees who responded wished they'd done prior to retiring. Here's a checklist of the most important steps.

Five Years Before Retirement

Decide what your lifestyle will be. You or your spouse may opt to continue working full or part time. You may wish to volunteer your services to a local hospital or charity organization. You may decide to return to college and complete a degree or take on graduate study. You may wish to travel and see the world. It's essential to make an outline of what your life priorities will be in order to determine your financial needs.

Once you've set your priorities, see if you can determine a target date for your retirement, and assess the financial risks involved with your chosen lifestyle. Be sure to include the five major financial risks that can affect your retirement:

• The effect of inflation on your retirement savings;
• The possibility of a longer lifespan, requiring your retirement savings to last longer;
• Too conservative investments that don't bring in enough earnings to keep pace with inflation;
• Increased costs of health care related to illnesses of old age;
• Spending your money too fast.
• A withdrawal rate that depletes assets too quickly

Consider which of these risks may threaten your situation most, and make the necessary adjustments to your retirement savings plan to compensate for them. Most retirees will need 80 to 100 percent of the income they earned before retirement in order to live comfortably.

Three to Five Years from Retirement

Start learning about the transition process into retirement. This includes setting up the elements of a successful financial plan, including a budget, a strategy for allocating your assets to gain maximum income, and a strategy for withdrawing funds from your savings. Attend retirement planning seminars or income planning workshops to get information on these tactics.

Go over your retirement benefits from your employer, such as any pension plans or health insurance benefits, so you'll know how they work. Don't forget to take your spouse's benefits into account as well. Once you have all the necessary details, put together your retirement plan. Learn which decisions can't be changed once you retire and what can be adapted as your life circumstances change.

Next, set up your retirement budget, including a detailed estimate of living expenses and your income stream. Know precisely what you'll be getting in Social Security payments, pension and other benefits. When estimating expenses, don't forget to account for inflation as well. If your budget shows that you need more income than your retirement savings will provide, consider postponing your retirement date, working part-time or reducing your expenses in order to balance your budget.

If saving in an IRA 401K, 403B or other retirement fund, review how your assets are invested. Try to achieve a balanced portfolio of investments that will show future growth and provide sufficient income to cover inflation, longer life spans and rising health care costs.

One Year or less from Retirement

Finally, when you're a year or less away from retirement, start consolidating your retirement accounts, and automate as many financial transactions as possible. Financial experts estimate that many workers may have as many as nine sources of retirement income, so it's important to consolidate those sources. Simplify your financial transactions for retirement by moving all accounts to a central source to give you more control over your assets. This will create the retirement "paycheck" that will enable you and your spouse to live happily ever after.

Be sure to watch the Retirement Rescue video to find out how to beat the returns you're getting from your Mutual Funds.

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