Are You Planning for the Reality of Retirement?

Published by Kate Moss, Wealth Advisor

The transition to retirement is exciting! You’ve worked for at least a couple decades to get to this point. And soon everyday will be a Saturday, where you get to choose how to spend every hour.
It can also be scary with feelings of uncertainty, wondering if you have saved enough and not knowing if the decisions you are making are the right ones. The reality of retirement is that it’s an enormous life change. One that you need to carefully think through and make wise plans in order to fully enjoy this next season of your life. The following are a few things you should consider carefully prior to your last day on the job.


Focusing only on growing your nest egg
While the need to grow your nest egg is critical for retirement success, you shouldn’t focus only on your finances and neglect the most important part of retirement. This is the dream part of preparing for retirement. How are you going to spend your time and fill your days? The options are endless – travel, spoil the grandkids, learn to paint, volunteer, grow a garden, go South for the winter, or just not use an alarm clock anymore. Take some time to consider this. If you become like a lot of retirees, they tell us they don’t know how they ever had time to work.


Understanding expenses in retirement
Today, retirees can be healthier longer, they travel more, they’re fixing up their homes, or learning a new hobby. Usually, their spending slows in later years, but not at first. Understanding your potential annual expense amount is incredibly important for retirement financial success. There are many ways to do this. But in basic terms, add your fixed expenses, which are your ‘needs’ to live to your ‘wants’ because we are made to enjoy life. This number will be a guide to base further decisions. It is also the biggest variable that can be adjusted in retirement.


Structuring your cash flow to be a prudent investor

Once you have that approximate expense amount, then subtract it from Social Security, maybe a pension or other income sources. That difference is what will need to come from your savings. However, it isn’t quite as simple as that. When do you take Social Security? What assets do you spend first? How much do you keep in an Emergency Fund? What if you don’t earn as much in the stock market as you thought you would? What about minimizing tax consequences? All of these are great questions to understand in order to know how to best invest and spend your nest egg. This can be a daunting task with lots of math. Getting these questions right means stretching out the life of your hard-earned nest egg.


Financially helping your family members
We know you have a big heart and want to help your kids or grandkids when they get in a bind financially. But when you’re retired, you’re earning and saving years are finished. We’ve heard it before, yes, they said they will pay you back. But that doesn’t account for lost earnings, taxes you have to pay to give them the monetary help, or even needing to pay higher Medicare premiums based on IRMAA. These unplanned withdrawals in retirement can seriously crimp your assets in later years. Consider what will happen to you if you then run out of savings. Who will help you?


Failing to consider long-term care need
The question you must ask yourself is, “Could your nest egg cover the potential cost of long-term care?”. Long-term care can be a very expensive cost and difficult to cover on top of your fixed expenses. Having the discussion of what type of care you want prior to an event is wise and helps understand what it would cost. It may then lead you to consider buying a long-term care insurance policy. There are a few types available and can be confusing to understand which is best for you. Having a conversation with your trusted financial advisor to understand how a policy could fit in with the rest of your planning is worth your time. This piece of your financial puzzle could be a meaningful anchor in your plan to support your assets.


So, what next??

Choose someone to talk to in order to understand what is best for you. Your spouse, partner or trusted friend, someone who will listen to you process these life changing decisions. Or start a retirement goals journal, as for some, the act of writing down your goals makes them achievable. Then find an advisor who will help guide you in preparation for your big day. One that really hears you and presents your new financial reality. Because to be honest, this is something you don’t want to get wrong. It’s very difficult to do a ‘do-over’ in retirement.


If you would like to see how we can help you through this process, click here to take our Retirement Readiness Quiz. After you complete and submit your information, an advisor will contact you and schedule your complimentary Strategy Session.

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