There’s a pretty good chance that your parents and grandparents retired just because they turned 65. While age is still an important factor, your ability to connect your financial resources to your lifestyle goals is what will truly determine if you’re ready to retire.
Here are three important markers to cross before you crack open your nest egg:
1. You’re Financially Ready
The most common question we field from our clients is, “How much do I need to retire?” Modern financial planning software has made it easy to determine the answer to this question and even show the effects of retiring earlier or later, saving more or less, adjusting your expected lifespan, etc.
Here are a few things to think about when evaluating your readiness:
— Most important - you have designed the lifestyle you want. Many clients who are preparing to retire tell us they’ve never kept track of how much money they spend. Time to start! If you don’t have a good idea of what your current lifestyle costs, it is impossible to project what you will need in the future. If you are like most everyone, there are things you have been putting off due to lack of time, and you should plan for those early in your retirement. This will probably increase your income needs, which is OK. If you have dreams of remodeling your home, buying an RV or a dream vacation, let us know, so we can model those expenditures also. We highly recommend front-loading your retirement income so you can do the things you want while your health and energy allows. This life is not a rehearsal! There will come a point where you can’t do what you want anymore and you will regret what you didn’t do the most.
—Your age, retirement accounts and Social Security plan are all in sync. If you’re planning on retiring early, be sure that your retirement accounts won’t charge you any early withdrawal penalties for which you’re not prepared. Also, keep in mind that the earlier you take Social Security, the smaller your payments will be. Can you afford to live without Social Security until age 70 to maximize your benefits?
—You and your spouse have a health care plan. Medicare insures individuals, not families. If only the retiree is 65, the younger spouse will need to buy a health care plan elsewhere.
2. You’re Emotionally Ready
We spend so much of our lives working that our jobs become a large part of our identities. Rediscovering who we are once we stop working is a major retirement challenge. To prepare for this emotional transition:
— Of course, talk to your spouse ahead of time. What do each of you imagine life will be like? What are the things you’re excited to do? What are you afraid of? What can each of you do to make this new phase of life as fulfilling as possible? It is a great idea to try out some of these ideas
while you are still working to zero in on designing the life you truly want.
— Make a list of 30 goals. What are the things you’re passionate about? Something you’ve always wished you knew more about? A skill you’d like to develop? A cause that’s important to you? An ambitious business idea that was too ambitious for your former employer? Each spouse should do this separately and then meet to discuss. The first 10 goals will be easy, the next 10 harder, and the last ones may be very difficult to capture, but often, there will be some great insights that you would not have realized without that effort.
— Check that your estate plan is in order. It’s understandable that many people avoid this part of their retirement planning. But putting together a legacy that could impact your family and community for generations can have tremendous emotional benefits. The peace of mind that comes from knowing the people you care about are taken care of can empower you to worry a little less and enjoy your retirement more.
3. You’re Ready to Do New Things
Ideally, the financial piece of this conversation should make you feel free enough to create a new retirement schedule based on the emotional piece. Plan your days around the people and passions that get you out of bed in the morning. Some ideas:
— Work at something you love. Take a parttime job at a company that interests you. Turn that crazy idea you couldn’t sell to your old boss into your own business. Consult. Teach. Volunteer.
— Focus on your health. You now have the time to be more intentional about your diet and exercise. Make it happen!
— Keep learning. Brush up your high school French or Spanish by enrolling in an online course. Sign up for cooking classes and get some new meals in your weekly rotation.
— Travel. Planning out a big vacation can be a fun project for couples to do to together. And while you’re looking forward to that dream trip, take a few weekend jaunts out of town. Stay at the new bed and breakfast you keep hearing about. Visit your grandkids. Go on the road with a favorite sports team and enjoy the local flavor in a different city.
If you’re nearing retirement and struggling with these issues, working with us may provide the clarity you are looking for. Let’s discuss how we can help get you ready for the best retirement possible.