Whether you've just stepped out of the workforce or you've been retired for awhile, it's essential to have an up-to-date financial plan.

Your first steps are to get your financial papers in order, create a net worth statement and income and expense statement, and estimate how long your money needs to last. Once you've got that done you'll be ready to work on your insurance, investment, and estate planning. Here's how to get started:

Get organized. Your first task is to organize your financial records and file them by category, such as Social Security, pension, IRAs, and homeowners insurance. With your files in order, you'll be able to keep track of your money and put your hands on important records when you need them.

As you file your financial papers, weed out old documents such as expired insurance policies that have no possibility of claims, outdated mutual fund annual reports, and records from vehicles you no longer own.

Once you've got your files in order, look through your records to find what important information you're missing. For example, make sure you have all your current investment statements, insurance policies, and pension plan information.

Create your financial statements. Your next task is to create or update two essential documents: a net worth statement and an income and expense statement. The best way to do this is to enter your information into a personal finance software program. That way you'll be able to easily update your information and keep track of your situation.

For your net worth statement, list the current value of all your assets, including your home, vehicles, personal property, savings, investments, and retirement accounts. For your liabilities, include any mortgage, credit card balances, or other outstanding debt. Then subtract your liabilities from your assets to calculate your net worth.

For your income and expense statement, record your guaranteed monthly income payments such as your Social Security retirement benefit and any pension benefit. Then to identify your expenses, review your checkbook registers and credit card statements for the past year and track your miscellaneous spending for awhile.

Remember to include the amount you're spending on recreation and travel, as well as the money you give to family and charity. Also include an annual estimate for home repairs and remodeling and major purchases, such as appliances or electronics.

Granted, this will take some time. But you need a true picture of your spending before you can figure out how much you need to withdraw from your savings each year and how long your money will last.

What about estimates for future expenses, such as possible medical or long-term care costs if you become ill or disabled? Since these costs are impossible to predict, it's essential to study your health insurance options carefully and consider your need and eligibility for long-term care insurance now.

Evaluate your expenses. Once you've got your expenses recorded, divide them into those that are necessities and those that are flexible or optional. This breakdown will help you plan how to invest your money and will be important if you have to cut back on your spending in the future.

Next, subtract your expenses from your guaranteed income. Any shortfall is the amount you have to cover with income and withdrawals from your investments or from other sources, such as part-time work. Don't be too quick to assume that a part-time job will fill some of the gaps for long, however. Although you may plan on working for awhile, you may decide not to sooner than expected or you may have to stop working for family or health reasons.

Likewise, be conservative when estimating the amount of income you can count on from your investments. That amount depends on how your portfolio is invested and will vary from year to year.

Estimate how long your money needs to last. Before you can figure out how much to withdraw from your savings and how to invest your money, you need to estimate how long you'll live. For example, according to the National Center for Health Statistics, on average, today's 65-year old men are projected to live to be about age 81, and today's 65-year old women are projected to live to be about age 84.

However, these are only averages for the entire population. What’s more, the averages don't account for the possibility of longer life spans due to future medical advances.

Therefore, you may want to personalize your estimate based on your current age, health status, and family history. Then if appropriate, consider adding five to ten years to that to be more certain you won't outlive your money.

If you're married or part of a couple, you need to think in terms of joint life expectancies. According to the IRS, the current joint life expectancy for a couple who are both age 65 is about 26 years, which means at least one of them will survive to age 91.

Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.

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