Retirement Income Plan Checklist Before You Retire

A retirement income plan checklist for the five years before you retire comes down to six jobs: count what you spend, set an income floor that covers the essentials, plan your taxes, line up Medicare, decide when to claim Social Security, and choose where guaranteed income and flexible reserves fit. Doing them in order, one year at a time, keeps the last year from turning into a scramble.

Why Five Years Out Is the Right Time to Start

Most people spend decades building a nest egg and a few weeks deciding how to spend it. Five years gives you enough runway to fix problems while you still have a paycheck. You can raise savings, pay off debt, test a retirement budget, and make tax moves that are hard to make after the paychecks stop.

It also gives you time to ask the questions that have no quick answer. How much will we really spend? What happens to the plan if one of us passes first? Who gets what we leave behind? Here is the retirement income plan checklist we walk families through, year by year.

Your Retirement Income Plan Checklist, Year by Year

Years five and four: know your numbers

• Track real spending for 12 months. Use bank and card statements, not guesses. Split the total into essentials (housing, food, utilities, insurance, healthcare, taxes) and extras (travel, gifts, hobbies).
• List every account and its tax type. Taxable, tax-deferred, and tax-free money behave very differently in retirement.
• Use catch-up contributions. Once you are 50 or older, the tax code generally lets you put extra into workplace plans and IRAs. Check current limits with your plan administrator.
• Pay down high-interest debt. Every fixed payment you remove is income you no longer need to produce.

Years three and two: build the income floor

An income floor is guaranteed money that covers your essential bills. Social Security is the base for most people. A pension adds to it. If those two fall short, an annuity can fill the gap with income backed by the issuing insurance company, which is why carrier strength matters. Our guide to using annuities for guaranteed lifetime income covers how that works.

The test is simple. Add up your essential monthly costs. Add up the income that will arrive every month for life. If the second number is at least as big as the first, the floor is built. If not, that gap is your homework.

Years two and one: plan the taxes

The stretch between your last paycheck and your first required withdrawal is often the best tax planning window you will get. Required minimum distributions generally begin at 73 or 75, depending on your birth year, and those withdrawals count as ordinary income whether you need the money or not. Partial Roth conversions, gain harvesting, and the order you spend your accounts can all lower the bill later. We break the order down in our tax efficient retirement withdrawal strategy guide.

Also think about the survivor. When one spouse passes, the other usually files as single and faces tighter brackets. The widow's penalty is easier to soften while both of you are here.

The final year: lock in the details

• Pick a Social Security plan. You can start as early as 62, and waiting generally raises the monthly check until 70. Full retirement age is 67 for anyone born in 1960 or later, according to the Social Security Administration.
• Line up healthcare. Medicare enrollment generally opens around your 65th birthday. If you retire earlier, you need a bridge. If you have a health savings account, remember that contributions generally stop once you enroll in Medicare.
• Watch the income that sets your Medicare premiums. Higher income can trigger surcharges, and the lookback runs about two years. A big Roth conversion at 63 can show up in your premiums at 65.
• Update beneficiaries and estate documents. Old forms and new life circumstances are a common mismatch.

Where Guaranteed Income and Permanent Coverage Fit

A floor handles the bills you cannot skip. The rest of your money handles everything else, and that is where flexibility matters. If the market falls the year you retire, cashing in investments to pay for living costs locks in the loss. That risk has a name, and we explain it in our post on sequence of returns risk.

A properly designed whole life policy can be one answer. Cash value grows on a contractual schedule, and policy loans are typically not a taxable event when the policy is structured and managed correctly and stays in force. In the down years you borrow from the policy instead of cashing in investments, and you give your portfolio time to recover. The policy also leaves an income tax free death benefit for the people you love. That is the idea behind The No-Compromise Asset: protection your family needs and money you can use while living. Dividends are not guaranteed, and results depend on the carrier and the design, so this piece works best when it is planned years ahead rather than the week you retire.

For a closer look, read how tax free income from life insurance works, and see the full retirement distribution strategy hub.

Questions to Ask Before You Sign Off on Your Plan

• Do guaranteed sources cover our essential bills if markets drop 30 percent?
• What is our plan if one of us needs long term care?
• Which account do we spend first, and why?
• What happens to our income when the first spouse passes?
• Does the money we leave behind reach the right people, and at what tax cost?

If any answer is a shrug, that is useful to know with five years left instead of five months. When you want a second set of eyes on your numbers, schedule a conversation with our team and we will walk through your checklist with you.