If “simplicity is the ultimate sophistication” then retirement is the least sophisticated thing out there. While saving for retirement is a fairly straightforward process, how one lives on that wealth, and doing so in a cost-effective and efficient manner, is, to coin the Beatles tune, “the long and winding road.”

And that’s just the investment aspect! The retirement picture for most includes five general planning areas:

Spending & Debt
Health & Insurance
Investments & Income
Taxes
Death & Your Estate

To make matters worse, financial advisors often present a laundry list of recommendations to their clients to get their financial homes in order. In my experience (yes, I’ve absolutely been guilty of this) the list is met with that glazed eyes look.

I’d like to take some time in to share a Retirement Checklist with you. It will be simple--just two, maybe three questions under each planning area to consider. It won’t include EVERY possibility, but it will ask you to consider the possibilities that in my experience are the most common.

Hopefully it will make preparing for your retirement more manageable.

Step 1: Spending & Debt

How much are you currently spending each month?
What debts would you like to be rid of before retirement?
- Credit cards
- Student loans
- Auto loans
- Mortgage(s)

The first question will help you know how much you might spend each month in retirement, and therefore how much you’ll need to save. Will you spend the same amount each month you spend in retirement? Typically no. Retirees tend to spend less. A good starting point is to assume your retirement spending will be about 80% of your pre-retirement spending.

The second question should be self-explanatory. I’ve never talked with anyone who has said “I prefer to retire on a fixed income with debt payments to make.”

Step 2: Health & Insurance

How do you view your current and future health?
- Excellent - I expect to remain fairly healthy and to live a long-life
- Fair - I expect some health challenges and to live an average length of life
- Poor - I expect to have major health challenges and to live a shortened life
How might insurance products like Medicare and long-term care insurance benefit you?

These two questions will help you consider your health, and the role insurance might play in covering its associated costs. I’ve argued that life insurance isn’t necessary in retirement, nor is disability insurance, but health insurance is essential and long-term care insurance--or at least a long-term care PLAN--may have a role to play.

Step 3: Investments & Income

How much retirement income do you expect your investments to generate over time?
What is your investing plan for retirement? Are you comfortable with it?
What is your expected Social Security monthly retirement benefit?

To figure out how much income you might expect from your investments in a two-step process. First, you need to know the future value of your investments. To calculate this, you can use a simple calculator, like this one. For example, assume you have $350,000 in your IRA today, you expect to earn an average of 6% per year on your investments, and you’ll retire in 10 years. The future value would be about $626,000.

By multiplying this value by 0.04 you can determine your safe withdrawal rate, which is a good starting point to decide how much you might withdraw from your account each year without running out of money in retirement. $626,000 * 0.04 = $25,040 per year (future dollars). Adding your expected Social Security annual payment gives you a rough idea of your retirement income.

Step 4: Taxes

What is your current marginal tax rate?
Assuming you’ll have more annual income now than in retirement, what is the best way to lower your taxes today?

Your marginal tax rate is the rate paid on your next dollar of income. You can use the chart below to look up your income. For example, if you're married, file taxes jointly and have a combined income of $80,250, your marginal tax rate is 12%. If you earn one dollar more, that next dollar (and any beyond it) is taxed not at 12% but 22%...nearly double.

Sources: IRS; bankrate.com/finance/taxes/tax-brackets.aspx

Knowing what you’re paying in taxes now and what you could be paying presents a tremendous financial opportunity, especially in retirement.

Step 5: Death & Your Estate

When did you last review the beneficiaries of your financial accounts?
Do you have a will or trust? When was it last reviewed for needed updates?

Estates aren’t just for Downton Abbey’s Earl of Grantham. Everyone has one. Your estate is simply everything you own. Reviewing the beneficiaries of your estate from time to time is a good idea, in case you prefer that “so-and-so” receive a reduced inheritance, or nothing at all.

If you have a will or trust, these documents should be reviewed as well. Trusts may not be for everyone, but every pre-retiree should at least have an updated will in place.

I hope this Five-Step Retirement Checklist has been helpful. As I said at the beginning, retirement can be a complicated process...just when families are looking for a little simplicity. My Retirement Checklist isn’t comprehensive, but I think it can serve as a good start to figuring out if your retirement is on track and areas you may not have considered before.