To-Do List for Those Getting Ready to Retire
There’s a lot more to retirement than just saving enough money to pay for it. When we’re almost there, it is time to really start planning for this life changing event.
Retiring should be a time for celebration, where we reach the pinnacle of our working years and get ready to relax and enjoy the fruits of a lifetime of labor. Transitioning to retirement can be a pretty stressful time in our lives though if we are not properly prepared for it.
It is never too soon to start thinking about planning for retirement, and starting to save for this the moment you hit the workforce full time is certainly not too soon, even though few people really take advantage of all the time they have to put together a sustainable plan for when they stop working full-time for good.
Building a comfortable nest-egg is only part of the task though, what we could term the preparation, even though this preparation generally lasts for decades. When we are getting close to the big moment, we also need to put together a practical plan to spring our retirement into action, as well as ensuring that once we’re there, we stay on the right track and are prepared as well as we can be for any bumps or surprises that we may encounter.
For those who aren’t quite there yet, or those who may be a long way away from this critical juncture in their lives, the financial planning part of things will give them plenty to do. There really isn’t much need to go into the finer details of what retirement will be like, although we still do need to have a good idea of what this will look like because we need to have a good idea about what we will need before we can plan for it properly.
Once we have made the decision to retire and have decided upon a date, this is when we really need to step into action and really start figuring out the details.
Looking at Some Data
We can gain some insight by looking at some statistics, and the first one is the average retirement age. For Americans, according to the census bureau, it’s 63, even though this is considered early retirement by Social Security and Medicare. If we do plan on retiring at this age or earlier, we need to realize that Medicare only kicks in at 65, and for those who are at this age now in 2019, full Social Security benefits aren’t paid out until age 66 or 67 depending on your month of birth.
For those younger than this, the expectation is Social Security will likely pay out at a later age as time goes on, and the further out we are from normal retirement age, the more difficult it is to predict. We probably won’t see a time in our lifetimes at least where Social Security benefits vanish, but they certainly will be diminished, by extending the qualifying age as well as reducing benefits paid.
Statistics also tell us that the average length of our retirement is 18 years, so it’s wise to plan on having enough to get us through that long, and preferably longer. This can also depend on factors such as one’s health and one’s family longevity, and the rule here is to err on the side of caution whenever possible.
As we’re getting close, it is important to adequately prepare, and this means more than just checking off a few key things a couple of months out. Howard Pressman, partner at EBW Financial Planning, believes that “the key to a happy retirement is in the planning done in the years leading up to retirement.”
He adds that with those who are coming up to retirement soon, “the better they can see what it is that they are retiring to, the more successful they are at this transition. Here are some of the things that many financial advisors suggest we think about as we get ready to enter this major life stage:
Coming up with a sound budget is seen as a real key to success. Ideally, we do this all along the way as well, but once in retirement, when income is generally quite a bit lower, it is all the more important to watch our spending as well as plan for expenses that may occur later.
We also need to realize that our spending often does not decline as much as we think it will when we retire. When we look to project this ahead, we may just focus on the essentials and may not properly account for everything we will actually be spending money on.
Part of this is projecting income as best we can. Our fixed income is easy to figure, but when we’re looking at how we’re going to manage our retirement savings, this can become quite a bit more complicated. Many people benefit from professional advice to get help with this, which means more than just speaking to your investment advisor, as we should have a neutral third-party such as an advisor who doesn’t have a stake in our assets to provide this advice.
If you are retiring as a couple, it’s also important to get on the same page as much as you can as far as putting your plan together. Just like in life, couples may have different perspectives on financial management as well as differing skills and discipline, and it’s even more important at this time in life not to be in disagreement about these things.
Since we are going to be relying on Social Security for some of our income at least, this is also a time to become very familiar with the process as well as any additional benefits that we may be entitled to if we apply for them. We also need to examine our Social Security statement to help time the retirement date, especially when working longer may be the wiser choice based upon entitlements.
Health care costs tend to go up overall as we age, and the time to plan for this isn’t after we stop working. Ensuring that we are doing our best to plan and set aside enough for these expenses can make the difference between living comfortably and financial disaster.
Many Considerations Do Not Involve Money
Not all of the things that we need to think about at this stage involve finances, and the non-financial considerations are pretty important to consider indeed. We could think of this category as encompassing everything else, and while people do think about such things, like their travel plans and such, even the more mundane things do require some consideration and planning.
The biggest challenge for a lot of retirees is to remain engaged, both physically and intellectually, after they stop working. Their jobs gave them plenty to do, and while people differ in the amount and the variety of engagement that they require in order to be content, we all need some, a good amount actually.
There is also an overlap between lifestyle and finances, for instance when people get enough exercise and are kept stimulated and happy, their health benefits generally, which can reduce the amount we spend on health care.
We also need to keep our affairs in order to plan for the time we’re no longer here, and this time will come sooner or later. Once we approach retirement age, if we haven’t figured this all out yet and have the necessary documents in place, the time for this is definitely now.
A lot of the value we get in retirement will come from the hard work that we’ve put into this plan over our lifetimes, but there’s more to this than just stashing away enough money or as much as we can and then packing it in and sitting back.
If we can plan well when we’re still working, to provide the fuel for this, and then also plan on how we’re going to use this fuel as the appointed time nears, and we decide well, we can be in an even better position to really enjoy our golden years.
Editor, MarketReview.com
Robert really stands out in the way that he is able to clarify things through the application of simple economic principles which he also makes easy to understand.
Contact Robert: robert@marketreview.com
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