Pre-Retirement Checklist: 10 Steps Before Retirement

Retirement is the single largest financial goal that most people will strive for, which is why it’s such an important focus in financial planning and wealth management. Whether you’re 25 or 55, it’s never too early (or too late) to start crafting your retirement plan. The more prepared you are, the better your chances of achieving a long and comfortable retirement.

The final five years before retirement are a critical time to turn long-term planning into specific decisions. A pre-retirement checklist can help you confirm your budget, income sources, health coverage, debt strategy, investments, taxes, and estate plan before your final day of work. Whether retirement is five years away or approaching quickly, the more prepared you are, the better your chances of achieving a long and comfortable retirement.

Pre-Retirement Checklist at a Glance

Take inventory of your assets and liabilities.
Build and maintain an emergency fund.
Create a debt and mortgage strategy.
Build a retirement budget and identify your income gap.
Choose a Social Security claiming strategy.
Plan your health insurance and Medicare enrollment.
Update your portfolio and retirement investment strategy.
Review your estate plan and beneficiaries.
Plan your retirement-account withdrawals and RMDs.
Look for opportunities to manage retirement taxes.

Full Retirement Age

The age at which you plan to retire will have a significant impact on your financial preparedness and resources during retirement. The full retirement age for individuals born in 1960 or later is 67, at least in terms of receiving Social Security benefits. You can also choose to start receiving benefits as early as 62, though you’ll generally receive a reduced monthly amount. You can postpone benefits until age 70 to earn delayed retirement credits, but those credits stop accumulating at 70.

It’s important to remember that while there are age restrictions for receiving your Social Security retirement benefits, retirement isn’t dependent on your age. Instead, you can retire at the age at which you’ve built substantial financial savings and resources to support yourself for the rest of your life. For some, that may come far earlier than the traditional “retirement age,” and for others, it may come later.

As you’re getting ready for retirement, go through these 10 steps to help you prepare and evaluate your future retirement from every angle.

1. Take inventory of your assets

The saying “knowledge is power” is never truer than when we’re talking about your personal finances. When you’re planning for retirement, it’s essential to have a clear inventory of all of your assets and liabilities. Tracking this information will help you understand when you may be able to retire. It will also give you and your financial planner steps to help you reach your goal more quickly.

2. Build an emergency fund

An emergency fund is critical whether you’re nearing retirement or not. During your working years, an emergency fund can provide a buffer in case of job loss or other financial emergencies. Notably, it can help you avoid having to take loans or withdrawals from your retirement accounts.

An emergency fund is just as important during retirement. Without an emergency fund, a large, unforeseen expense could require you to pull more from your retirement funds than expected, which could impact the longevity of your savings. The last thing you want is for a financial emergency early in retirement to shave years off your savings.

3. Create a debt and mortgage plan

Entering retirement with less debt can reduce the amount your savings must support, but becoming completely debt-free is not always the best use of available cash. Start by prioritizing high-interest debt like credit cards and personal loans. Then evaluate lower-rate debt, including a mortgage, based on the interest rate, remaining term, required payment, liquidity needs, investment risk, and your comfort with carrying debt.

Do not assume mortgage interest will automatically reduce your taxes. Home mortgage interest is generally deductible only if you itemize deductions and meet other IRS requirements, so the potential tax benefit may be limited or unavailable.

Before paying off a mortgage, compare the guaranteed savings from eliminating interest with the value of preserving cash for emergencies and retirement spending. Just make sure you aren’t still reliant on credit cards and personal loans for your day-to-day expenses when you retire. Paying off the debt doesn’t solve anything if the root problem is still there.

4. Build a retirement budget and identify your income gap

Everyone’s retirement needs are different, so it’s important to run your own numbers. Estimate essential and discretionary spending, including housing, health care, taxes, travel, and irregular expenses. Then compare that budget with reliable income sources such as Social Security, pensions, annuities, and part-time work. The difference is the annual income gap your savings and investments may need to cover.

Test whether your planned withdrawals can support that gap over a long retirement, including inflation and unexpected costs. This information will help you determine how much you should have saved, how much you should be saving monthly, whether you’re currently on track, and what adjustments may be needed before retirement.

5. Consider your Social Security claiming strategy

For most retirees, Social Security is still an important part of their retirement savings strategy (though it shouldn’t be the only part). Depending on your own financial resources and retirement goals, you can create a Social Security claiming strategy that fits your needs.

Remember that you can claim benefits as early as 62 years old, but the monthly amount will generally be reduced. If you want to retire early and have other financial resources to offset the lower amount, you may decide the reduced benefit is worth it. On the other hand, if your priority is increasing your monthly benefit, you may decide to wait until your full retirement age or as late as age 70.

Finally, remember that you don’t have to start receiving benefits at the time you retire. You could retire early and live off your personal savings, choosing to receive Social Security benefits later. You may also collect benefits while working, but if you’re below full retirement age and earn more than the annual limit, Social Security may temporarily withhold part of your benefits. Beginning with the month you reach full retirement age, earnings no longer reduce your benefits.

6. Square away your health insurance

Health insurance is one of the biggest costs that retirees face, and it’s important to have a plan in place. Most people first become eligible for Medicare around age 65. The Initial Enrollment Period generally begins three months before the month you turn 65 and ends three months after that month. Some people with qualifying coverage from current employment can delay Part B and later use a Special Enrollment Period, but COBRA does not extend that enrollment period.

Medicare Part A (hospital insurance) is free for most individuals 65 and older, while Medicare Part B (medical insurance) and Part D (drug coverage) require a monthly premium. You may also decide to purchase either a supplemental insurance plan or a Medicare Advantage plan (known as Part C) to replace Original Medicare.

It’s often best to consult a financial planner or another expert when deciding the best health insurance plan for you. And remember—if you retire before age 65, you’ll have to find alternative coverage to fill in the gap between when you retire and when you’re eligible for government-provided coverage.

7. Update your portfolio

Your investment portfolio should change and adapt throughout your life depending on the current phase you’re in and how far you are from retirement.

Generally speaking, you can afford to assume the most risk as a young investor. However, as you get closer to retirement, it’s typical to reduce your portfolio risk. After all, the last thing you want is for a recession to wipe out a large portion of your portfolio when you’re planning to retire in a couple of years.

There’s no perfect portfolio allocation for everyone, but a financial planner can help you find the right balance for you based on your risk tolerance, risk capacity, and time horizon.

8. Plan out your estate

As you near retirement, you may also be thinking about what happens to your assets when you pass away.

If you have children or grandchildren, you may want to preserve some of your wealth to pass along to them. Even if you don’t have loved ones to pass along your assets to (or significant assets to pass along), it’s still important to have an estate plan in place. A well-crafted estate plan puts you in the driver’s seat, rather than allowing someone else to make the decisions.

And remember—your estate plan can begin while you’re still alive. If you want to pass along your assets to loved ones, a financial planner can help you put a plan and the right tools in place to do that during your lifetime.

9. Investigate your retirement investing needs

Just because you’ve reached retirement doesn’t mean you’ll stop investing. However, your strategy is likely to change.

First, your investment strategy will change because you’ll likely have less money to put away each month. During your working years, you were likely contributing to a workplace retirement plan like a 401(k), as well as individual retirement accounts.

However, you likely won’t be making those contributions anymore. Additionally, your approach is likely to change since your risk capacity has changed in retirement.

You can certainly continue investing, but it’s important to adjust your strategy to fit your current needs.

10. Learn how to withdraw funds and minimize taxes

Unfortunately, taxes are likely to eat into your retirement income, but there are ways to minimize the impact. You can be proactive about reducing your tax liability by using Roth accounts or health savings accounts (HSAs), both of which allow for tax-free withdrawals after a certain age.

You can also reduce your taxes by being strategic about how and when you pull from each of your various accounts, as well as by using any tax credits and deductions available to you.

Both before and during retirement, a financial planner or another tax expert can help you craft a plan to minimize your tax burden, allowing you to keep more of your hard-earned retirement dollars.

Frequently Asked Questions About Your Pre-Retirement Checklist

1. What should I do five years before retirement?

Five years before retirement, build a detailed retirement budget, estimate reliable income, calculate the remaining income gap, and test whether your savings can support it. Use this window to increase contributions, reduce expensive debt, review investment risk, plan health coverage, and model Social Security and tax decisions before your options narrow.