The 5-Step Pre-Retirement Planning Guide

Planning for retirement can mirror taking on a part-time job. There are a number of moving pieces to consider and important decisions to make as you approach retirement age. In this pre-retirement planning guide, we have identified the 5 main steps you should take, as well several questions you should ask yourself along the way that can help you navigate through the planning process and design your ideal retirement.

1. Define Your Retirement Goals

First and foremost, describe what the word “retirement” means to you. Each person’s situation is unique, of course. Many folks long for the days when they can relax on the porch with a beverage, read a book, tend to the garden and play with grandkids. Others can’t wait to get out of the house, hop on an airplane or cruise ship and travel the world. Yet countless others will keep working in some capacity, either because they can’t afford to or don’t actually want to stop working.

Ask yourself: How do you want to spend your time in retirement? Do you resonate with one of the scenarios above, or a combination of all of them? Are you and your spouse on the same page?


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2. Assess Your Healthcare Needs

Next, do an honest assessment of your well-being and life expectancy. As you age, healthcare expenses will only increase. Hospital visits, prescriptions and emergencies may come to the forefront of your life at one point or another, and you do not want unexpected healthcare expenses to catch you off-guard.

Your assessment will likely dictate which part of Medicare you choose to participate in when you become eligible at age 65. Part A covers hospital insurance, Part B covers medical insurance and Part D covers prescription drugs. There is also Medicare Advantage, also known as Part C, which is the “all in one” alternative to the original version of Medicare, as well as Medigap, a supplemental insurance you can get on top of Medicare Plan A and B.

Choose carefully. Once you pick a plan, you are locked into that plan until the annual open enrollment period comes around at the end of each year. If you’re not sure, make sure you discuss your situation with a financial advisor. Remember: Not all financial advisor firms are created equal.

Ask yourself: What are your retirement healthcare needs? What is your life expectancy? Which part of Medicare works best for you?

3. Set a Realistic Budget

Now that you’ve defined what retirement means to you and assessed your healthcare needs, it’s time to create a realistic budget that suits your desired lifestyle.

Basic living and healthcare expenses will undoubtedly take up a big portion of your retirement budget. Budgeting for travel, entertainment and contingencies should also be considered. Additionally, you might want to address your housing situation. For example, should you downsize in order to reduce your living expenses? This could be a serious option if you are in debt or do not own your home.

Now is also a good time to analyze your current spending habits and determine whether you can cut down on any of them, since your retirement income will most likely be lower than your current income.

Ask yourself: What are your biggest budget items in retirement? How much money do you plan to spend each year?

4. Collect Social Security Benefits

The first three steps of the pre-retirement planning guide addressed your goals and needs. Now it’s time to take a look at the income part of the equation.

The Social Security Administration calculates your retirement benefits based on the amount of money you contributed during your working years. It assumes that you will start receiving benefits at your full retirement age, which is between age 65 and 67 depending on the year you were born.

You are eligible to receive 100 percent of your monthly benefits starting at your full retirement age. However, you can start receiving benefits as early as age 62 or as late as age 70. Naturally, the earlier you start receiving benefits, the smaller your monthly paycheck will be. Keep in mind that once the dollar amount of the paycheck is set in place, it will be set for the duration of your retirement.

For example, assuming your full retirement age is 67 and you start collecting Social Security at age 62, your monthly benefit will be reduced by 30 percent. On the other end of the spectrum, your monthly benefits can increase 25 to 30 percent if you wait to age 70 to start collecting. Once you reach 70 years of age, your benefit increases are capped, so there is no reason to delay past that time.

Working with a financial advisor who understands your entire situation, concerns and goals can really be beneficial with these decisions. 

Ask yourself: At what age will you want to start collecting your Social Security benefits? If you retire at age 62, will you be able to pay for health insurance for the next three years?

5. Analyze Your Nest Egg

If you have a company 401(k) or Retirement Investment Accounts (RIAs), you can start making penalty-free withdrawals at age 59-½. Add in your savings or other investments to determine your retirement nest egg.

If you decide to travel extensively during retirement, you can potentially earn extra money if you rent out your empty house or sell it outright.

As you get older, having steady income is crucial to covering your lifestyle budget. Analyze your nest egg carefully and optimize your investment portfolio to suit your retirement income needs.

Ask yourself: What are you invested in? Can you reliably draw down on your retirement portfolio each month and not have to keep working?

Putting it All Together

Planning for retirement may seem like a straightforward process, but it isn’t always easy. Making adjustments while you’re still in the workforce can make things much easier than waiting until you’ve already retired. A small misstep along the way can lead to bigger problems down the road and impact how you live the rest of your life.

Working with a financial advisor can be extremely beneficial. Look for financial advisor firms that adhere to the fiduciary model and see if your retirement plan is on the right track. A financial advisor can help you match your monthly income and expenses, as well as help ensure that you have enough money reserved for contingencies.

When the time comes, we want everyone to be able to retire with a peace of mind and take advantage of what often are the best years of their life.


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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Chairman.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.