Are you counting down the days, or is retirement still a nebulous concept of some far off Neverland, or are you somewhere in between. Wherever you are in your process, retirement demands answers to a host of questions. The better your answers, the more enjoyable your retirement years will be.
Why are you retiring?
Are you being forced out by your company, or gently pushed? Is failing health affecting your work performance? Is there a person or cause that needs your undivided attention; a spouse, a grandchild, a charity? Life situations beyond our control often drive a retirement decision. Or maybe, you have the freedom to select your own retirement date and you have set that date. Just because you have reached the magical age when society says you should retire is not reason enough. Your reason needs to be intensely personal and fit with your life plan.
What are you going to do with your time?
Closely related to the first question is the second. Counting actual work hours, lunches, and commuting, you are going to have 40-60 hours of time to fill each week when you finally retire. There are plenty of cable channels and streaming services that will gladly take your monthly fee and fill the time. But is that how you want to spend your days? You may want to keep you hand in your profession by consulting, mentoring, or working part-time. Maybe retirement allows you the freedom to start your own business with that great idea that has been gnawing at you for the past 20 years. You may have a hobby or two that you would love to develop expertise in. Your church, civic group, or local museum would love to have you volunteer your time. Retirement gives you flexibility to explore your passions. The point is to be purposeful with the time you’ve freed up.
Where will you live?
Is the ole’ hometown the place you want to spend the rest of your days or do you have a hankering for a change of scenery? Do you want the maintenance-free living of a condo or apartment, or do you need to tinker around your own house? Many retirees consider downsizing the home, often opting for one floor living. What amenities do you need close at hand; medical care, recreation, shopping? Most importantly, what people do you need to be near? Giving significant thought to this vital question will help you avoid the mistakes of a knee-jerk reaction.
What can you afford?
A person in their late fifties or early sixties, contemplating retirement, may live another thirty years or more. How are you going to finance those years without a paycheck? This is where careful planning begins to payoff. There needs to be an honest assessment of what spending in retirement will look like coupled with a review of the available resources. Some expenses will stay at the same level through retirement, others can drastically change. You still have to eat, so the grocery budget shouldn’t change much. But if you plan to travel extensively the vacation budget may balloon. Many people pay off their mortgage while they are still working to remove a line item from the budget. And don’t ignore the cost of healthcare. Depending on when you retire, you may have to pay for health insurance yourself before Medicare kicks in. How will you pay for what Medicare doesn’t cover? Is a Medigap or Medicare Advantage plan best for you? What will you do about prescription coverage? These are just some of the spending questions that need answers before your retirement begins.
The other half of the spending equation is the income component. Social Security was never intended to provide all your retirement needs, but it is a piece of the puzzle. Today may be a good day to go to ssa.gov and see what you can expect to receive monthly. The fear mongers predict Social Security will not be around when you retire, but this is unlikely. Politicians who wish to be reelected are not willing to offend the Senior Citizen voting bloc. If you retire from public service or a company that still has a pension plan, good for you. That monthly stipend will be another piece of the financial puzzle. The letter-number jumbles are a source of retirement funds for many. Whether a 401k, 403b, 457 plan, IRA, SEP-IRA, SIMPLE, or Roth IRA, putting money away during your working years is wise preparation for retirement. Savings Accounts, CDs, annuities, and part-time jobs are other ways retirees finance their golden years. What’s important is that you develop a plan for both income and spending. JGUA advisors have walked many a client through these questions and we would be honored to walk this road with you.
My dad didn’t plan on retiring at 58, but his company offered early retirement and encouraged him to take it. My parents had always planned to retire in Florida and escape the cold winters of the Northeast. They put their condo up for sale and spent six weeks visiting dozens of communities. They decided on one, bought a home and settled in. My dad worked part-time for a few years and they spent their time volunteering for a civic organization. My siblings and I had a place to spend Florida vacations and my parents came north every summer. They had worked through the questions, found the answers that fit them, and had fifteen wonderful years until my dad passed away. Your retirement journey may be filled with the same level of happiness if you find the right answers to the retirement questions.