Most employees put saving for a vacation above saving for retirement—and lots of them spend a lot more time and effort planning for that vacation, too, than they do for making sure that their retirement days will be happy ones.

But to spend their golden years in the best possible way, they should take more time to plan for it than they did those two weeks in Hawaii last year.

After all, if luck holds, they could spend 20–30 years in retirement.

And to that end, there are some pretty important elements that ought to factor into that plan.

A report on Kiplinger highlights some of those vital points to cover well in advance of actual retirement—in fact, the earlier the better.

The sooner employees identify potential gaps in planning, problems or expenses, the sooner they can take steps to correct course and improve the likelihood of a pleasant and secure retirement instead of years of pennypinching and making do.

Here are some suggestions for that plan:

10. Figure out expenses before retirement.

If employees have no idea how much they spend, they'll be in for a rude awakening once that regular weekly paycheck ends and they're faced with a Social Security check and a pension or 401(k) distribution.

All of a sudden there’s a whole lot of month left at the end of the money—and that’s not a good realization to have, especially if facing a fixed income with no room to maneuver.

Instead, the report suggests that people look at last full year’s expenses, month by month and category by category.

Add them all together and divide by 12 to get an average year’s spending for each regular expense: not just taxes, mortgage and car payments, home and car maintenance and utility bills, but also such easily overlooked categories as ATM fees, vacations, holiday and birthday gifts, dining out and any hobbies.

And for those planning on doing a lot of traveling during retirement, or pursuing a degree or certification, they shouldn't forget to add that in too; travel and tuition aren’t cheap.

9. Look at options for health care.

Do employees know how much they'll be spending for Medicare, including Part B and D premiums? Do they plan to buy a supplemental plan? And do they have any idea how the distribution of income could affect those Medicare Part B and D premiums?

Maybe they don’t know that the IRS looks at income from two years back when it determines the Income Related Monthly Adjustment Amount (IRMAA).

If current income is less than it was two years ago, they can appeal that with the Social Security Administration, which could result in reducing the IRMAA.

But when they're retired, employees are still going to have to be able to pay health care expenses, so they should look at such things as tax planning and using tax-efficient strategies to help minimize income tax exposure.

8. Can consolidating accounts make life easier?

Required minimum distributions (RMDs) at 70½ may be easier to manage and calculate if there aren't so many accounts to draw from.

Some people “collect” accounts over the years, from job-hopping or for other reasons, such as opening an account to collect on a higher interest rate that no longer exists, or to collect a “free gift” given at the time of account opening.

If there’s no longer a good reason to have a particular account, a potential retiree might want to close it and move the money into another existing account; it could make life easier not having to sort through a bunch of statements from different institutions.

And remember, retirement should be all about easy.

7. Make sure to understand all the options for Social Security.

Considering the expected number of years people will spend in retirement, thanks to longer lifespans, they need to look into different scenarios for collecting Social Security benefits.

They might collect them for more years if they claim early at age 62, but they'll pay for it in the long run with smaller benefit checks—for the rest of their life.

If, on the other hand, they postpone claiming till 70, benefits will be higher—but if they're in ill health, they might not live long enough to make that delay financially worthwhile. They should make sure to consider all the options—including spousal benefits, and when or whether those should be claimed—before making a decision.

And they need to remember that, if a spouse will be depending on them during retirement, they should keep in mind their needs—and try to maximize the income they’ll get upon the employee's demise.

6. Track down all potential sources of income during retirement.

There’s Social Security, of course, but employees should check if they have a pension from an earlier job or an IRA or two languishing forgotten. Or multiple 401(k)s.

Even forgotten bank accounts that were overlooked in a relocation might be out there.

They should list all annuities, retirement accounts, investments, rental income, Roths, REITs and bonds—savings and otherwise.

And they need to pay attention to their own risk tolerance, and figure out the most efficient ways to turn them all into income during retirement.

5. What will they do about long-term care?

If an employee retires and they or their spouse develop Alzheimer’s or some other debilitating disorder that requires not just care, but long-term care, will they have a LTC policy?

The older they are when they buy it, the more it will cost them—but the LTC market has seen lots of major rate hikes, as well as the exit of many companies that decided not to sell such coverage any more. So those options may not even be affordable.

But LTC policies aren’t the only choice out there; some types of life insurance offer limited coverage for such care, such as annuities with enhanced benefit riders or living benefits.

They should be careful what they buy—and be sure they understand how it will work should the need arise.

4. Make a survivor assessment.

Remember, it’s not just Social Security a future retiree has to consider for a spouse in case of their death or disability (and vice versa).

What kind of income will be available for the survivor? Are any funds going to become unavailable—such as a pension that terminates on the death of the worker, instead of paying benefits to the survivor?

Employees need to make sure both are covered as well as possible with the resources they have.

3. If using a financial advisor, go for a fiduciary.

Regardless of the political storm over the Department of Labor’s fiduciary rule, no one who approaches retirement with an advisor should have any doubt that that advisor has the client’s best interest at heart—and that means going with a fiduciary.

Otherwise your employee could end up spending a lot of retirement money on fees that are higher than they need to be and products that really don’t serve their needs as well as something else might.

2. Get all legal documentation together and make sure everything is current and updated.

Both regular and living wills, legal and medical powers of attorney, beneficiary designations on insurance policies, pensions, and other forms of income, as well as deeds and other documents such as trusts—even pet trusts to care for four-legged (or feathered) friends—need to be current if they’re going to do any good.

Employees should review everything and keep documents in one place, and then make sure that family or friends know where it can be found in the event something happens to them.

1. Have a talk with family members about end-of-life decisions and where important papers can be found in case the worst happens.

Yes, it’s retirement and not the prelude to one's demise, but it’s better if next-of-kin know a future retiree's wishes in the event they pass away and leave pets or dependents at home who must be cared for.

And if an employee has never told anyone he or she plans to vanish into the Himalayas in search of enlightenment, how will they know not to consider the enlightenment-seeker lost and start the paperwork on their estate?

Employees need to make sure they've covered as many bases as they can -- then they'll be set to better enjoy retirement when it arrives.

Instant Insights /

10 elements of retirement planning employees can't leave to chance

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