Year End Retirement Planning Steps

What will a typical baby boomer be doing the last week of the year to advance toward a goal of a successful retirement? I don’t know how typical we are but here is a list of steps I will be taking this week, in no particular order.

1. Assess Tax Obligations. In the past we have had some issues with under-withholding which, in turn, creates a risk of tax penalties. The solution has been to approximate our federal income tax liability, compare it to our year-to-date withholding, and make last minute adjustments as needed on my final paycheck. On occasion, that last paycheck has gone 100% to the IRS.

2. Re-balance our Retirement Portfolio. We did not exit the stock market during the crash of 2008-2009. I did sell some financial stocks when news of dividend changes became public. Also, we directed a greater percentage of new money to cash equivalent investments to reduce our overall exposure to equities. That will continue as we build up our guaranteed retirement income fund. Now is the time to move some money around to generally re-balance within what is essentially a 10-speed version of a couch potato portfolio. This is relatively easy to do because my 401(k) plan includes a self-directed brokerage option that gives us access to all stocks, mutual funds, and ETFs in the typical markets.

3. Calculate and Compare our Net Worth. Net worth is a financial progress metric that I look at weekly. I track it inside Quicken which is linked to all of our accounts. At the end of each year, I also like to compare our net worth to prior years. I will update car and real estate values for purposes of this year-end update. I will be writing about this at the end of this week. Finally, as a matter of curiosity,  I will probably compare our net worth to other boomers using one of the online net worth comparison tools.

4. Evaluate Possible Insurance Adjustments. Year-end is a good time to evaluate possible changes to our insurance plans, such as increasing car insurance deductibles and dropping unnecessary coverages, such as collision coverage on an older vehicle. (All of our vehicles are older. Not one has fewer than 100,000 miles on it.) I will also take a look at our life insurance coverage. I have a twenty-year term life policy that will expire soon so I need to think out whether it needs to be partially replaced and if so, with what.

5. Do a Health Improvement Assessment. Nothing can ruin a well-planned retirement faster or harder than poor health. I’m recovering now from surgery on an arthritic knee. This tells me I have to make some changes to preserve that knee, including losing even more weight and transitioning from walking to biking as a primary form of exercise. It’s time to make plans for doing all of that, ASAP.

6. Plan to Eliminate Sources of Stress and Annoyance. My plan is for a phased retirement. I am putting the pieces in place to allow that to happen. That process includes identifying things in my life that cause recurring stress and annoyance, then seek out strategies for eliminating them. The benefits of a phased retirement are diminished if the stresses of working for the money are still there. I also have to be mindful of not causing my wife (32 years today!) increased stress as I strive to decrease my own. 2009 has been a good year for stress reduction. More to come in 2010!

That’s my list of year-end retirement planning steps. Do you have any suggestions for me?

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