By Allen Giese, CLU®, ChFC®, ChSNC®

Retirement isn’t just about reaching a certain age or having hit your full amount of years of service—it’s about being prepared to live the life you’ve always dreamed of. Whether you're a year away, five years away, or just getting started on your retirement planning journey, the steps you take now can make all the difference.

In this video, we’re breaking down the seven essential things you need to do before you retire to set yourself up for a secure, stress-free, and fulfilling retirement. So stick around, take notes, and let’s make sure your retirement years are everything you’ve worked so hard for!

1. What Do You Want to Do in Retirement?

The first item on the list is actually the most fun: You need to visualize or think about what it is you want to do in your retirement. As an example, things we’ve seen from clients here include seeing all the national parks in your RV or doing some European or world travel. Maybe it’s venturing deeper into a hobby or passion you have. Or maybe it’s just enjoying some quiet time, gardening, or working on your property. Or enjoying family. Or all of the above!

My point is, this is it. You made it. Now it’s your time. You don’t want to waste it, and if you’re like most folks we work with, you’ve got some great times and experiences ahead of you. If you do it right. But as Mary Oliver says in her well-known poem, “The Summer Day,” it all starts with knowing what it is you want to do with your one wild and precious life.

2. Know Your Spending

The second thing on our list that you must do before you retire is to know how much you are spending now to live in your world. And I’ll give you some insight. It’s probably more than you think. At least that’s what we consistently find with the clients we work with.

We ask clients, do you know how much you're spending, in total, to create the world around you that you’ve grown accustomed to living in? I’m talking about everything, not just the total of your monthly bills. I’m talking about the cash you spend, the dinners you buy, the gifts you give, and the stuff we all spend money on regularly that we don’t even think about. Add it all up, and if you’re like most folks we talk to, the number is going to surprise you—at least a little bit. But you have to know this number because it becomes the basis of everything you plan going forward.

But how do you get it? It’s actually easier than you think. And it isn’t about adding up all your grocery receipts or keeping track of every type of expense you have. That’s all well and good, but we find that’s more than most people want to do. A better way, and actually more accurate, is to simply look at the cash flows going out of your spending accounts—like your checking account—and adding them up over the past year. You can easily do that by looking at the totals on your monthly bank statement. When you’re done, you can’t argue that it’s not what you spent—because it’s actually what you spent.

3. Assess Your Guaranteed Income

The next thing you want to do, or number three on our list, is to assess how much fixed, guaranteed income you’ll have in retirement, and determine if your retirement accounts and savings will be able to cover the shortfall, if there is any, between that and your expenses.

Guaranteed income are things like your FRS pension amount and any other pensions you’ve earned and your Social Security retirement benefits. It can get a little complicated since, with your pension benefits, you have up to four options that change your benefits when someone dies.

And with your Social Security, you have the big variables of being able to start anytime between 62 and 70, and the age you start affects how much benefit you’ll receive. And then there’s the effect your pension and other income have on your Medicare premium, which in turn potentially lowers your net benefit from Social Security. Like I said, it can get complicated in a hurry.

If you’re finding that your total spending is more than you have lined up for in guaranteed income, then the difference needs to be made up from your savings like your deferred comp, any IRAs you might have, your spouse’s 401(k) or 403(b), or any other investments you have in retirement.

If that’s not an option and your spending is still more than you can support, you have a few choices: You can figure out how to reduce your expenses (which is never easy) or wait a little longer to retire so assets can grow more. Another variable you can play with is when to take your Social Security retirement benefits—that can make a difference.

4. Build Up Your Deferred Comp Plan

Number four on our list of things you’ll want to make sure you do before you retire is to see if you’re on track to have at least enough in your deferred comp plan to do what you need that plan to do for you.

One of those things is to take advantage of the $3,000-per-year pre-tax ability to pay health insurance and long-term care insurance premiums. We just did a video on that, and it’s on our YouTube channel and webpage, so I’m not going to go deep into that one here today.

Your deferred comp is also a great vehicle to help you bridge the gap, if there is one, between your income needs and the expected guaranteed income you’ll have.

5. Use Your Prepaid Legal Plan

The fifth item we like to see our clients take care of is, if you have a prepaid legal plan through your department as an employee benefit, to use it now to pay for your estate planning documents that you’re going to need. Things like a last will and testament, a durable powers of attorney and a health care surrogate powers of attorney, and perhaps a revocable living trust. Things everyone should have, but if you wait until after you retire, it’s probably gonna cost you a lot more than if you had taken care of this while on the prepaid legal plan.

6. Secure Health Insurance

Six, make sure your health insurance is lined up and secure, and you’ve figured out what that’s going to cost you. Many of you have continuing health insurance coverage through your department or your union, as well as various subsidies from FRS and possibly your union as well.

So contact your FRS employer about continuing your group health coverage and what options are available to you there. Make sure you’re aware of any forms you need to complete before you retire and how to submit them.

7. Stress-Test Your Plan

And finally, you need to stress-test your plan. Run it through as many scenarios as you can create. Most financial planners and wealth managers out there today have wonderful and powerful software they can share with you that allows you to see, usually pretty graphically, if your plan has enough in it to go the distance and what would happen to the plan if you throw some curveballs at it.

Throw everything you can think of at it: bad markets, expensive health events, lots of travel, maybe even a wedding or two—the more you can throw at it, the better.

This is where we can help. We’ve seen a lot in the 20 years we’ve been helping FRS Special Risk folks with their retirements. How’s it go? “We know a thing or two because we’ve seen a thing or two.” Yup, that’s it. And that’s true. We have seen a thing or two.

If you’d like to consider us as your source for a second opinion, we’d be honored. Just give us call, and let’s set up a time to talk it over.

Thanks for watching. We’d love it if you hit the subscribe button. In the meantime, be safe. You’ve got a great retirement ahead of you!