A Retirement Checklist

If you’re starting to think about either early or traditional retirement in the coming years, there are a number of issues to consider before pulling that trigger.

Today’s Saturday Selection addresses a number of financial and emotional aspects that ought to be addressed prior to making that big leap to the next phase in life.

From debt to spending to insurance to how you’ll spend your days, there’s a lot to think about. This post originally appeared on The White Coat Investor.

A Retirement Checklist


As doctors enter their 50s and 60s, many start dreaming about retirement; unfortunately, properly planning for retirement requires as much time and effort as planning a career.

Truthfully, the non-financial aspects of retirement are perhaps the most important. Unless your retirement is a “forced retirement” due to disability or job loss, you want to make sure you’re “retiring to” something rather than just “retiring from” something.

Physicians tend to be type A personalities and don’t rest on their laurels well. Physician identities are also often closely tied to their careers, which further complicates the complete cessation of work. However, in this article, I’m going to be discussing some financial items you probably ought to check off prior to retiring.


West-Crack Yosemite
I hope Dr. Dahle used a checklist before doing this!


1. Debt Reduction


There is always a mathematical argument out there that carrying low or even moderate interest rate debt while investing your money can lead to greater wealth in the long run. However, these arguments usually ignore both the risk of this “investing on margin” and the income requirements necessary to service the debt.

While there may be “good debt” for someone in their 20s and 30s, by the time you are getting close to retirement, there is no good debt. Every bit of debt you pay off reduces your overall financial risk and the income your assets need to produce to maintain any given retirement lifestyle.


Are student loans paid off?


I advocate most doctors pay off their student loans within 2 to 5 years of completion of training by living like a resident until loans are gone. Some might consider that extreme, but there is no doubt that it is a terrible idea to carry student loan debt, whether it is your own or that of your children, into retirement.


Is consumer debt paid off?


There is no reason to ever carry a balance on a credit card, and very little reason to have any significant debt for automobiles or “toys” such as boats, airplanes, RVs, time-shares, etc. Certainly, if you have any of this “bad debt,” it should be long gone before any serious consideration of retiring takes place.


Is the mortgage on your home paid off?


While mortgages are often considered “good debt” — and are available these days at very low rates — having a paid-off home, especially in retirement, frees up a big chunk of income, provides an important inflation hedge, and allows you a palpable feeling of financial security.

Plan to have yours paid off by retirement, whether that means taking out a shorter mortgage, making extra payments, or downsizing prior to retirement.


Are investment property mortgages paid off?


Using leverage in real estate generally does boost returns. However, in retirement, you want those investments providing as much income as possible, and the best way to do that is to pay off the mortgage.


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2. Can you cancel your term life insurance?


One great measure of truly being financially independent is that if you die, your loved ones don’t have to change their financial plans. Term life insurance should be kept in place until you reach that point. If you (and your loved one) are not comfortable canceling your life insurance, you may not be financially ready to retire.

3. Can you cancel your disability insurance?


If you’re financially independent, you shouldn’t need it.

4. Do you have a plan for health insurance?


If your employer has been covering your health insurance premiums, will you have enough financial resources to do it on your own, at least until you qualify for Medicare at 65? Remember that Medicare does not cover everything.

While this is less of a big deal for a self-employed doctor who has been paying his own premiums for years, it prevents many people from retiring as early as they would like.

[PoF: Look into new options available penalty-free for early retirees in 2019]

5. What is Your Income plan?


Although it may seem obvious, I have been surprised at how many people come out of retirement because they were unable to match their retirement income to their spending needs.

A lifetime of budgeting may be the best preparation for this, but we all know how few of us really budget seriously.


Do you have a realistic assessment of how much you will spend in retirement?


Start with what you are spending now, subtract out everything you won’t have to spend due to not working (such as commuting costs, payroll taxes, and CME expenses), add in expenses you will have when you are not working (perhaps extra traveling or healthcare costs), and add a little extra as a fudge factor.



Add up your non-portfolio sources of income


If you qualify for Social Security or a pension, you can count that. If you have (or will) purchase an immediate annuity, you can count that, too. You may also wish to add in the net operating income of your rental properties (usually about 55% of your gross rents), but keep in mind that large expenses, such as a new roof or windows, will eat into that income significantly.


Understand what the 4% rule means


As a general rule, you can withdraw something like 4%, indexed to inflation each year, of a reasonable portfolio and expect it to have a very good chance of lasting 30 years. That means if you need your portfolio to provide $100,000 in income each year, you need a portfolio of $2.5 million.


Do you have a plan for Social Security?

Delaying Social Security claiming until age 70 provides an important inflation hedge and longevity insurance. But that obviously reduces your income if you retire well before 70, like many doctors wish, or are forced, to do.

Also keep in mind there are real advantages to having each member of a couple claim Social Security at a different age.


6. Go for a test drive


Live on your expected retirement income for six months prior to retirement. Is it reasonable or do you feel pinched all the time? Better to find out while you still have a job.



What do you think WCI missed, got wrong, or even got right? What else should someone on the eve of retirement have taken care of before pulling the “ejection lever?” Comment below!

17 thoughts on “A Retirement Checklist”

  1. I would always recommend getting all your debt paid off before retirement. I also agree that physicians are often type A personalities and are very tied to their careers. This makes retirement that much more challenging.

    But health coverage seems to be the biggest concern. If you retire before medicare kicks in at age 65, health insurance payments often won’t fit well in your budget.

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  3. All great stuff. One error as far as I can tell:
    Carrying a mortgage is likely a greater hedge against inflation than having additional equity in your primary residence. Reasons:
    1) If you never plan to sell or re-leverage, then your equity is not part of your retirement assets
    2) Inflation and devaluation usually go hand in hand. As such, while the amount of money you owe would be the same, the impact of that debt would be less.
    That being said, I have accelerated my mortgage payoff for the other reasons that you correctly cited.

    • Well, simplicity in life can be undervalued. I do have what’s called a HELOC of which I can withdrawal and speculate in securities until my hearts content if I wish. It would certainly have to be in different market dynamics than they sit today. The cost of borrowing between the two isn’t that different.

      On the other hand, if tomorrow I get run over by a Mack truck or any other series of unfortunate events, finances are much less confusing for my wife rearing two young kids alone. Covering a property tax and home insurance would be way less than that of a simple 2 bed/2 bath apartment.

      It’s all personal choice based on risk, potential return and an understanding of cash flow. My current allocations in equities still substantially outweigh non-liquid assets.

    • totally agree. The author never got the financial skew of the strategy, the reason being most people never study financial history. Like the western world in the 70’s . I always carry a smallish 1-2M in long term 30y fixed ( I timed it well last time at 3.8%). I can pay the whole thing cash in one check: would NEVER do that. That’s my inflation insurance (with some gold)

  4. Good talk. I guess we are financially independent since we’ve increased our net worth greater than our post tax income for 2 years in a row.

    Also this month we have knocked out our mortgage and can holler at Dave Ramsey that we are debt free.

    It all feels great. I am young however at an age at 39. We have very young kiddos, just 4 and 6. Telling kids to work hard and do good is probably far less effective than showing them how to work hard and do good.

    Insurance and health care costs scare me for some reason, so I’m gonna keep the nose to the grind stone. maybe I’ll even waste a ridiculous amount of money on a boat, or second home or something before I hang up the old stethoscope.

    Cheers, TJ

  5. Love your suggestion to live on your retirement income before taking the plunge. That can be an eye opener. But you will still not know how much your travelling will cost since you won’t start that until you are not working.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

  6. 7. What to do with all that time? Do you have a hobby? A hobby might actually save you money. If you have a hobby to fill up all that free time, then you will be less likely to spend that time on spending money on things you don’t need.

  7. One thing that was missed is tax considerations in retirement, and also diversity among accounts post tax, IRA, Roth IRA and its effect on tax life.

    I wrote an article over on Dads Dollars Debts that reviews some of these considerations and adds a tad of granularity to WCI’s article. It’s important to plan for this aspect of retirement early since things like Roth conversion can be quite expensive if you didn’t bother to make a plan. Planning early allows the power of compounding plus astute timing in the execution allows you to the minimize impact and maximize the benefit of Roth conversion

  8. PoF this is a handy checklist and the only other item I would add is that it might be a good time to sit down with an attorney and look at your estate plans. With the change in income, cancellation of insurance, and asset re-allocations that come with “retirement”, you may want to re-think how you want your remaining assets allocated when you pass away.

  9. There’s a lot that those retiring in the near future have to worry about, making it very easy to forget stuff. This list is a great reminder (#6 is key) and all one needs is a quick check to confirm nothing important was missed!

  10. Good list.
    Health insurance costs is a huge question mark for many of us. My state doesn’t participate in federal exchanges and so if you don’t have insurance through your employer you end up with a bad medicaid plan renamed.
    I like the test drive idea. I think it was “Pete the Planner” who wrote a whole book about that. For the financial part I feel like I need to set up more dividend-paying stocks, interest-bearing accounts, real estate etc to truly replace my paycheck.
    I still have disability and life insurance policies. I’m not sure if that is based on irrational fear? Inertia? or just that the costs of the premiums are so low and affordable? Do you recommend everyone get rid of them after FI?

    • I got rid of disability insurance around age 45. If you are truly FI with enough funds forever then it is just habit. I know lots of docs who keep it without thinking about it.

  11. Found PoF recently and really enjoy it. This checklist is great. The insurance point is one we missed … could have stopped disability premiums earlier had we thought about it.

    Though we are not physicians, we are in high wage professions. To that end, I would suggest that you may rely on Social Security and pensions but not that you can count on them.

    We run scenarios that reduce or eliminate contributions from these sources. Pensions are often under-funded, and employer resolution can be dramatic. In 2015, 69 private pensions declared bankruptcy and turned administration over to the PBGC, which caps payouts at a fixed amount irrespective of what your plan promised you. Or a company can reset payouts to equal asset provisions, again reducing your actual benefit vs what you were promised. Social security has been discussed broadly, with multiple possible outcomes. It’s prudent to see what your outcomes look like without these income streams – not pleasant, but helps decision making.


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