Financial Independence Checklist

The dream for many of us is to be financially independent. It usually takes years to build up to this point in life. But it can offer freedom, security and the ability to explore new adventures.

There are different things to consider depending how old you are. Some of these items are tax law related. Some are a function of age—you need different types of support as you grow older.

So take a look and see what affects your situation. And of course, you need to be building toward financial independence long before you get to retirement age.

Ages 57 to 64

• What do you want to do with your time in retirement? Can you estimate what those activities will cost?
• How will you stay connected to friends and family during retirement? What kinds of experiences are you hoping to have?
• At what age do you plan to retire? Why that age? Will you phase into retirement? If for some reason you couldn’t retire at that age, what would “Plan B” look like?
• If you have a serious health crisis five years before you planned to retire, how would you adjust your plan?
• If the market “crashes” right before you plan to retire, will you keep working a little longer?
• If your company offers you an early retirement “package,” have you thought through if you would want to take it? If they paid you for an extra year in salary and pitched in on health insurance, would it be enough to compensate for leaving earlier than expected? Don’t forget to consider the psychological implications—it takes a while to adjust to the suddenly new lifestyle. If you retire before age 65, how will you cover health costs? If you plan to purchase private health insurance, do you know what to expect in costs? What about your spouse’s coverage?
• Where do you want to live in retirement? Will you have more than one home? Do you think you’ll move? Have you “tried out” that lifestyle on a temporary basis? Do you know how much to expect in costs?
• Can you afford to pay off your mortgage? Would you feel better without that debt? Do you need the tax deduction?
• Do you plan to travel more in retirement? Where do you want to go? How much more should you budget for those expenses? When do you think you’ll stop doing as much travel? Will your health insurance cover expenses if you are out of the country?
• How much will your mandatory expenses be in retirement? If you are still working, how does that compare to what you spend now? Have you tried to live on the amount you are targeting for retirement?
• Do you plan to use an annuity to cover mandatory expenses? Have you compared costs at several annuity providers?
• How much will your discretionary expenses be in retirement? If you need to cut back due to economic conditions, do you know where you’d cut?
• What sources of income will you have in retirement? Is that enough?
• If you have a defined benefit plan, have you thought about taking an annuity versus a lump sum rollover when you retire? If you take an annuity, would it be over one life or two? How does that affect the amount paid?
• If you have a defined contribution plan (401k, 403b, 457), will you roll over your plan to an IRA or keep it at your company?
• If you have 401(k) loans, try to pay those back or they will count as a taxable distribution when you roll over your plan to an IRA at retirement.
• When do you plan to take Social Security benefits? Do you know how much you’re giving up if you take it before full retirement age?
• If you have company stock through stock options, restricted stock, employer stock in a retirement plan, do you know what happens with these plans when you retire? Do you understand the tax consequences?
• Do you need to adjust the risk tolerance of your portfolio by changing the asset allocation in the years leading up to retirement? Remember you also have to invest for all the years in retirement too.
• How will your portfolio be protected against inflation?
• Do you need to simplify the number of accounts and/or holdings you own? Can you consolidate and spend less time managing all of those accounts?
• Have you considered long-term care insurance? If you choose not to purchase this insurance, what is your plan should you no longer be able to care for yourself?
• Have you considered a Roth IRA conversion?
• If you think you might want to live in a continuing care retirement community, have you visited the places you are considering? Do you know how much they will cost?
• How long did your parents live? Grandparents? Be realistic about what that may mean for you. But also keep in mind people are living longer and making different decisions about nutrition and exercise that may affect the longevity equation.
• What gives you purpose outside of work?
• What does “fun” mean now?

Ages 65 to 75

• Did you initially think you wanted to retire at age 65 and now that it’s here you want to keep going? If you’re happy and productive, don’t worry about pushing out the date. Lots of people do that. Don’t be surprised if it happens more than once.
• Are you still physically active? What do you want to do while you are still healthy?
• What does it look like when you need to slow down physically?
• Do you know what parts of Medicare you plan to elect? Will you need a supplemental Medigap policy? Do you know how much that will cost?
• How are you going to pay for bigger medical expenses? Long-term care insurance? Health Savings Account? Out-of-pocket?
• Are you thinking about downsizing your home? Have you started to clear out what you no longer need?
• How long do you think you can live independently? Be realistic. Would you bring caregivers into your home?
• Have you figured out how to replace your paycheck? What can you expect in monthly income and from what sources?
• Do those income sources rise with inflation? If not, how will you keep pace with growing costs?
• If you will be drawing on your investments, how will you “refill” the cash pool?
• What are your mandatory expenses in your retirement years? How specifically are you going to meet those? Social Security, pensions, portfolio withdrawals?
• When it’s time to take required distributions from retirement plans, do you need that cash or do you want to give part of it to charity?
• If you don’t want someone else to decide where you need to live if you need more help, where would you like to go?
• Have you and your spouse decided when to start Social Security benefits?
• Should you adjust the asset allocation in your portfolio? Do you need to take as much risk going forward? Are you investing for future generations or just your lifetimes?
• If you or your spouse are hit with a terminal illness, how would that affect how you want to spend your remaining time?
• How active do you plan to be in raising grandchildren? How could that affect your Plan A in retirement?
• Have you thought through how you might need to care for a parent? Can you afford that? Would they live with you? How would your lives need to change?
• Do you expect an inheritance? How could that change your own retirement plans?
• Do you want to leave your kids (or other heirs) something or are you going to spend your last dollar on your last day?
• Do you still need all of your life insurance? Will any of your policies expire before life expectancy?
• Now that you have more time, how can you use that to benefit others? Is there a charity or organization that does important work that you can contribute time or money to?

Ages 76+

• Who can you rely on to help you as you age? Do you need a health advocate to guide you as you age?
• Would you prefer a caregiver coming into your home versus moving to a retirement community? Do you know who you’d call to find a caregiver?
• What would make your life easier and more enjoyable?
• Do you have friends in retirement communities that you enjoy spending time with? Can you see yourself moving into that community?
• How will you leave your legacy? Should you let go of some things now?
• Do your heirs know where to find your important papers? Keys?
• Do your heirs know your end-of-life wishes?
• Have you had a family meeting so that your heirs know what to expect? What are you waiting for? Do you need someone to facilitate that meeting?
• Can your fixed income streams from Social Security, pensions and/or annuities cover your essential expenses? Do you want to purchase an annuity to “lock-in” that essential stream of income that lasts as long as you do? You may want to leave a healthy amount outside of fixed streams of income for more flexibility for expenses that may arise or other “wants” or “wishes.”
• If you have mobility issues at some point, how could you still get around? Walker? Scooter? Caregiver? How can you adjust your mental attitude to compensate for some loss of physical ability?

Summing Up Financial Independence

Financial independence is all about finding the balance of time and wealth that makes life meaningful. That can happen at many different times throughout a lifetime. It almost always involves giving considerable thought to what brings you joy and how your life has purpose.

Aligning money and meaning allows you the freedom to live life on your own terms. Your money supports your dreams for your own life and those you wish to travel with on life’s path.