Articles Retiring Next Year? Four Things to Consider Before the Big Day

January 31, 2017

With only a year to go before retirement, you’re probably looking forward to this exciting new stage of life. Retirement to you might mean getting to spend more time with friends and family or plan an exciting trip. Maybe you’re preparing to spend more time on hobbies or even start a new career.

Regardless of your retirement goals, first, of course, you must consider your finances. In addition, as you gear up during your final year of work, consider these questions to make sure you’re prepared for the big day:

1. Is your goal still realistic? Use the Retirement Planner to estimate if you’ll have enough money to meet expenses. If you’re behind on savings or getting cold feet about giving up work, consider asking your employer if you can work fewer hours. Part-time or consulting work may help you ease into full retirement. If you expect to start a new career or business, make sure you’ll have the training, skills and financial backing you need before you take the plunge.

2. Have you set a date? Think carefully about when would be the best time to leave, both for you and your employer. Is your business cyclical? You might consider leaving during a lull. Are there potential bonuses or accrued vacation you should hold out for? Don’t leave money on the table if it’s just a matter of a few months. Do you have a plan for health insurance coverage? This is especially important if you’ll need coverage until you’re eligible for Medicare.

3. When should you let your employer know? This depends on your employer’s expectations as well as your position and responsibilities. Generally, the harder you’ll be to replace, the more time you should give. Those in executive or management roles may want to make the announcement at least six months before retirement to help ensure a smooth succession. Others may need only one month to six weeks to train a replacement. Make sure to give at least the minimum notice required by your human resources department.

4. What paperwork is involved? Check with your HR department to review pension paperwork, 401(k) rules, payout schedule options and survivor’s benefits, if applicable. Learn about your options for taking distributions from your employer-sponsored retirement plan and the pros and cons of each one. Rolling over your plan rather than taking a lump sum can help you avoid a large tax bill and perhaps even penalties.* Learn more about rollovers here.

Financial planning doesn’t end when you retire. Transitioning from earning income and saving to living solely on your savings account is a process. You need to plan for making your money last as long as you do. Contact a financial advisor with Navy Federal Financial Group at 1-877-221-8108. He or she can help you explore your next financial steps.

Qualified distributions from most employer-sponsored retirement plans are subject to ordinary income taxes. Premature distributions (before age 59½, or age 55 if leaving your job) may be subject to a 10 percent tax penalty. Consult a tax advisor or attorney for information specific to your situation.

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Investors should carefully consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. This and other information about municipal fund securities is available in the issuer's official statement which can be obtained directly from the issuer, or if distributed through a broker dealer, may be obtained from a financial adviser, and should be read carefully before investing.

An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

If a municipal fund security describes one or more of their investment options as having the characteristics of a money market fund, it is important to know that an investment in the security is not insured or guaranteed by the FDIC or any other government agency (unless such guarantee is specifically provided by or on behalf of such issuer) and, if the security is held out as maintaining a stable net asset value, that although the issuer seeks to preserve the value of the investment at $1.00 per share or such other applicable fixed share price, it is possible to lose money by investing in the security.