Five steps to help you achieve retirement balance
Are you ready to retire? How do you know if you’re ready? How do you get ready?
Now that you’re getting closer to retirement, you've got questions—and we've got answers. Following these five steps can help you get closer to achieving retirement balance.
Step 1: Calculate your retirement spending needs
The retirement planner at myplan.johnhancock.com projects your personal expenses and your retirement income for each year of your retirement¹
Let's start with spending.
After you log in to your retirement account at myplan.johnhancock.com, click on "Let's go!" You’ll see your projected expenses in three categories:
1 Basics
2 Healthcare
3 Nonessentials
Your projections are based on information you provide us in the retirement planner. The more information you provide, the closer we can estimate your spending needs.
Picture your retirement
Knowing how you want to spend your time in retirement can help you figure out your retirement expenses. The retirement planner can help you by showing you a personalized projection of your retirement expenses. Think about these questions as you model different scenarios in the planner:
- When do you want to retire?
- How does your retirement date affect your savings and spending?
- What will you do in your free time?
- Will you get a part-time job or start a second career?
- Where will you live?
Look at your health insurance options
Before you leave your job, find out about options for health insurance—what’s offered through your company and what’s available through independent medical plans, Medicare, and Medicaid. Ask about monthly costs, deductibles, and limits, as well as the coverage for wellness visits, specialist visits, medications, and treatments.
Put together a budget
Some of your costs will stay the same, but some will be different. You'll see in the retirement planner that when you retire, your spending is generally higher in the beginning—as you travel, eat out, and are generally active. Your spending then slows down for a bit, then goes up again, driven by healthcare expenses. Use the annual spending estimates in the planner to guide your budgeting.
Pay down your debt
Consider paying down your debt to free up cash in retirement.
Debt you may want to eliminate before retirement
| Mortgages | Car loans |
| Credit cards | Student loans |
Review tip 1
Consider how these factors may affect your future spending
Healthcare inflation
Investment returns
Life expectancy
Use this worksheet to keep track of it all
Step 2: Map out your retirement income sources
The retirement planner can also help you add up all your sources of retirement income. It starts off with your John Hancock retirement plan and an estimate of your Social Security payment, and you can add others.
Potential retirement income sources
Savings Include your savings accounts, CDs, and other accounts. |
Investments Do you have mutual funds, money market funds, brokerage accounts, or other investments? |
Retirement accounts You could have more than one: 401(k), 403(b), SEP, Keough, IRA, cash balance, or traditional pension plan, and others. |
Retirement household income Will you or your spouse work part time? Do you have rental property or any other income sources? |
Inheritance Do you expect to inherit anything from a family member? |
Social Security The retirement planner includes an estimate of your Social Security payments. |
Review tip 2
Savings
+
Retirement plans
+
Investments
+
Social Security
=
Your retirement income
Contact the U.S. Social Security Administration online or at 800-772-1213 (TTY 800-325-0778). They can provide your projected benefits.
Step 3: Bridge the gap between spending and income
The retirement planner will show you if there’s a difference between what you’re projected to have and what you’re projected to need
If your retirement plan allows you to contribute, visit our retirement planner to model strategies that can help increase your savings and close the gap.
Still need to save more?
Once you turn 50, you can save more in your retirement plan—in 2023, you can save up to $30,000 in certain workplace plans, including 401(k), 403(b), and profit-sharing plans. Look at your budget and find ways to save more. For example, cutting out one grande cappuccino a week could free up nearly $200 per year for savings. Even small changes can make a difference.
Think about your investment strategy
The more your investments earn, the less you may need to set aside for retirement, so make sure your investments are working for you. Many experts recommend that the closer you get to retirement, the less risky your investments should be. Be sure you balance potential risk with potential reward and consider how far away you are from your target retirement date or the date you plan to begin withdrawing money.
Review tip 3
Save more
Check in on your investments
Consider a change in your plans
Step 4: Create a plan to access your money in retirement
Know your retirement plan options
When you retire, you’ll have several options for the money you worked hard to save in your employer’s plan. Before drawing down your savings to provide income in retirement, you should first carefully review these options and choose the one that best fits your needs.²
Typical options for your retirement plan savings
1 Staying in your existing plan You may be able to keep your money in your existing retirement plan, where it can continue to grow tax deferred. If you have a John Hancock plan, check with your employer about the rules for taking withdrawals.⁴ For instance, some plans allow you to take out a little at a time, some allow you to set up a recurring withdrawal, and some require you to take all your money out at once if you don’t meet minimum balance requirements. As long as you're in the plan, you can continue to access myplan.johnhancock.com and all our tools, as well as your plan’s investment options. |
2 Moving to an IRA IRAs usually aren’t tied to an employer. Your savings can continue to grow tax deferred, and you can add more money over time, including from other retirement accounts. John Hancock offers two IRAs that you can choose from based on your investing style. Both are easy to open, either online or with one-on-one help. Plus, as a thank you for being a John Hancock customer, all sales charges will be waived when you move funds from a retirement plan to a John Hancock IRA.⁵ |
3 Moving to another qualified plan If you’re eligible for another qualified retirement plan, you may be able to transfer your money into it. Check with your new employer for their plan rules. |
4 Taking a cash distribution If you’re age 59 ½ or older, you’re entitled to take cash from your 401(k) without penalty, although you may owe state and federal taxes. You should also look at your plan rules to see if you can take a partial withdrawal or if you have to take it all at once. |
Create a withdrawal—or drawdown—strategy
There are a few methods that can help you figure out how much to withdraw every year. What they all have in common is that they try to help you withdraw your money in a way that balances your need for income with the need to make your money last for the length of your retirement. In addition to accounting for longevity, they also take inflation into consideration.
Four potential drawdown strategies
1 John Hancock's retirement planner Using the projections from our retirement planner at myplan.johnhancock.com, you can estimate how much you may need each year of your retirement for basics, healthcare, and nonessentials. It’s all done for you—and you make adjustments if you’d like.¹ |
2 Earnings only Depending on your investments, you could choose to live on the income (interest and dividends) that your assets potentially generate. This allows you to continually pull income without eating into your principal. |
3 Systematic withdrawals With this method, you withdraw the same amount each year, adjusting the amount for inflation. You’ll need to estimate how long you expect your retirement to be and determine the percentage that you’ll be able to withdraw each year to make it last. One common method is to base your withdrawal percentage on the required minimum distribution (RMD) formula for rollover IRA or 401(k) savings. |
4 Time segmentation (bucket) method This method has you divide your retirement years and your assets into different segments, or buckets. Each investment bucket would correspond to a time period, generally with less risky investments (including fixed income and money market) funding the earlier years and risker assets (stocks) held for later years. This would also require that as you move through retirement and your buckets, you adjust the risk profile of future buckets as they draw closer to use. |
Step 5: Plan for the next phase
Make sure you’ve planned for all aspects of your next phase of life
- Do you have a will that lays out where your assets will go? If you don’t, state laws will decide—and they may not make the same decisions you would. Consider talking to a lawyer about creating a will and estate plan.
- Do you have living will and healthcare proxies so that your loved ones know what to do if you can’t make a decision about your own healthcare? Consider talking to your lawyer to make sure your wishes are properly covered.
1 The projected retirement income estimates for your current John Hancock accounts, future contributions, employer contributions (if applicable), and other accounts set aside for retirement used in this calculator are hypothetical, for illustrative purposes only, and do not constitute investment advice. Results are not guaranteed and do not represent the current or future performance of any specific account or investment. Due to market fluctuations and other factors, it is possible that investment objectives may not be met. All investments carry a degree of risk, and past performance does not guarantee future results. 2 There are advantages and disadvantages to all distribution options; you are encouraged to review your options to determine if staying in a retirement plan, rolling over to an IRA, or another option is best for you. 3 John Hancock Personal Financial Services, LLC, is an SEC registered investment adviser. John Hancock Personal FInancial Services, LLC, 200 Berkeley Street, Boston, MA 02116. 4 Ordinary income taxes are due on withdrawal. Withdrawals before the age of 59½ may be subject to an early distribution penalty of 10%. 5 Other account and investment-related fees and charges are applicable.
Retirement can be within reach.
It's time to get ready!
Helpful links
Go back to your John Hancock retirement plan at myplan.johnhancock.com.
Create an account on the Social Security website, or call 800-772-1213.
Learn more on the Medicare website or call 800-MEDICARE (800-633-4227).
Important disclosures
Clients should carefully consider a fund's investment objectives, risks, charges, and expenses before investing. To request a prospectus or summary prospectus with this and other important information, visit jhinvestments.com.
Mutual funds are distributed by John Hancock Investment Management Distributors LLC, member FINRA, SIPC.
MF3019205 7/23 MGR0728233019205
Related articles
What impact will Social Security have on your income?
-
Tell us what you think about these resources