Financial Checkup for Pre-Retirees

In 2004, Fidelity Management and Research asserted a retiree’s financial plan should yield an income stream of between 80 to 100 percent of the pre-retirement income in order to live comfortably.

In my opinion, that assertion assumes the retiree continues to live the same lifestyle as in pre-retirement. One can make choices that cut a budget, such as leaving a high-priced urban area like New York City and moving to a less expensive community or a smaller home. Doing so lowers the cost of taxes, housing, and utilities. If the retiree moves to a mild climate, such as exists in southern Florida, then he or she will save money on clothing, too, since heavy winter clothes aren’t needed. In areas, such as Florida, that grow much of the nation’s produce, fresh foods cost less. And the long growing season means a retiree can grow a kitchen garden, even in flower pots on the patio, to reduce food costs.

What a pre-retiree needs is a tool to help decide whether he or she has saved enough money or acquired assets to cover retirement costs. The following five questions, from How to Love Your Retirement by Hundreds of Heads, are a good starting point.

  1. Determine your post-retirement lifestyle and expenses. Will you travel? What will it cost? Will you eat out or cook at home? What will your recreational costs be? How much do you spend on hobbies or books?

  2. Determine your specific retirement benefits. These include social security, IRA’s, 401K plans, pensions, investments, annuities, etc. Know what health care benefits you are entitled to and can depend on.

  3. Create a plan for health care and long-term care coverage. Determine the costs at facilities of your choosing. Calculate your prescription drug costs. Anticipate the medical conditions your genetics may throw at you.

  4. Plan for contingencies. Have an emergency fund to cover the costs.

  5. Look at your family. Will you be required to help someone else financially during your retirement years?


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