Retiring Earlier Than Planned? A 7-Step Retirement Checklist

Filbrandt & Company Reports
Volume 21, Issue 3

Report Summary

  • Create a vivid vision of your life after work
  • How to evaluate an early retirement package
  • Unexpected costs of early retirement
  • Vital changes to make to your portfolio
  • How retirement impacts your well-being

The prospect of retirement can be both thrilling and daunting, and, given the world today, you may be thinking more seriously about retiring earlier than planned. Before moving from the relatively secure world of academia into the unmapped world of retirement, there are seven key items, financial and non-financial, to consider for a smooth transition.

1. What will retirement look like for you?

 Envision your ideal post-career routine. Are you in a suburban ranch-style home, a condo on the beach, or a bungalow in the backwoods? How often are you traveling, visiting with family, or taking long walks around the neighborhood? What kind of car are you driving? Understanding your vision for retirement in vivid detail will help as you work through the remaining questions.

2. When do you plan to retire? 

For many university professionals, retirement is not a date, but a question of whether they can afford to retire. Reviewing your accounts and financial commitments with a trusted financial planner will help you learn if you can afford to retire comfortably. There are other factors that may influence the timing of your retirement: family considerations like spending more time with grandchildren or aging parents and professional considerations like ongoing work with graduate students or grant/research commitments. The era of working remotely opened the door to alternative work arrangements that could ease the transition into retirement. Alternatively, you may also wish to discuss a phased retirement plan.

We have seen several institutions offering early retirement or "buyout" packages. For those presented with an early retirement option, expediting carefully laid plans can be unsettling. However, when evaluating an offer, consider its structure:

  • Benefits: Which ones are included and for how long? If lost, can you replace them privately and cost-effectively, especially health and life insurance? If you haven’t reached full retirement age, how will you bridge the gap until you are eligible for Social Security and Medicare?
  • Salary continuation: How close does it get you to your intended retirement date?
  • Work options: Are you limited from taking part-time or other work elsewhere? Is that important to you?

3. What will it cost?

Once you have envisioned your retirement and decided when it should happen, you can begin to calculate the cost. A good place to start is with your current expenses. From there, adjust for the expenses that will change in retirement like healthcare costs, travel, or a second home. Plan for unexpected expenses that are not specifically included in your budget. While no one’s timeline is guaranteed, your lifestyle and family history may provide clues as to how long you may expect to live, which can dramatically impact the cost of retirement.   

4. How will you pay for it?

Typically, savings and Social Security are the largest sources of retirement income, but you may have others, including pensions, royalties, part-time work, consulting income, and income from a working spouse. It is a good idea to diversify your sources to generate income in multiple tax buckets by including ordinary income, capital gains and qualifying dividends which have preferential tax rates, and tax-free income like Roth. It is also prudent to secure a line of credit before you retire. Qualifying for these can be more challenging when you no longer receive a paycheck and can be useful when unexpected expenses arise.

5. What changes do you need to make to your portfolio?

As you move from contributing to withdrawing from your portfolio, it is imperative to reevaluate your allocations and how you manage the risk within the portfolio. Having sufficient cash on hand and stable assets in your portfolio will shelter you from excessive risk and provide income security.

6. What housekeeping items do you need to take care of prior to retirement?

Many human resources departments offer a checklist that includes items you need to complete prior to retirement, which include updating your contact information, notifying your chair or dean, and applying for Medicare and Social Security (if applicable). Also, replace benefits that will end upon retirement and update beneficiary designations as needed. 

7. What are the mental/emotional/social aspects?

Finally, take time to understand what retirement will mean beyond the financials. Using your vision from step 1, imagine a typical day in your life as an academic leader: lectures, labs, committee meetings, journalists and commentators seeking your professional opinion, and the prestige of being a tenured professor. Retirement signals a drastic reduction of these functions, if not a complete cessation. Without work or a structured daily routine, some individuals feel a loss of identity or purpose. Consider what you will do with this gift of ample time. You may need to find a new balance as the relationship dynamics may change between your friends, colleagues, and family. It is important to be aware of the possible effects retirement can have on your mental health and well-being.

  Whether earlier than planned or right on cue, retirement is a process that requires a proactive approach. Working with a Certified Financial Planner™ can be a good way to ensure a successful retirement… however you define it!  

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