Getting Ready to Start Your Retirement

My Comments: The woods are full of people attempting to help you prepare for your retirement. Almost all of them want to give you investment advice which may or may not be good advice.

It’s an accepted fact that life in 21st Century America is better with more money than it is with less money. These advice givers cause you to believe that enough money will suffice to cause you happiness. Nothing I say here is to suggest less money is better, just that more money is only part of finding happiness.

As someone who has both transitioned to retirement and now teaches folks HOW to think about retirement, I have a different approach. Instead of focusing time, energy and attention on ‘answers’, I instead help people focus on ‘questions’.

The critical element here is the nature of those questions you must ask of yourself and the need for your unique answers. Your answers allow you to develop your strategic ‘road map’. This map will help you make better tactical steps along the way. These decisions will in turn increase your chances of a worry free and financially secure retirement. And that leads to happiness.

When I hold workshops on retirement planning, I insist that attendees write down answers to the eight critical questions I present to them. Those answers become the foundation of their personal ‘road map’ to the future.

by Scott Spain \ January 4, 2019

The journey to retirement begins to take on a greater sense of importance during the final decade of your working years. That’s because the decisions you make during the last 10 years of your career are critical to your ability to actually enjoy retirement—however you may choose to define that season of life.

A lot of major life events tend to occur during the late stages of your career. If you have children they are likely launching their own careers and leaving the nest. Your own parents may be nearing the latter stages of their own retirement years. As a result, you may find yourself somewhere in the middle of all of those life changes wondering what your own retirement looks like while you continue to work hard and save as much as you possibly can. In fact, the final decade of your career may finally seem like a time when you finally have the ability to make saving for retirement a top priority.

But with retirement on the horizon there are some important steps to take (other than saving as much as possible) to help make your transition a successful one.

Define What Your Version of the Ideal Retirement Looks Like

What do you look forward to doing the most during retirement? Will you stop working completely or do you plan to take a part-time job or starting a business venture? There are no one-size-fits-all answers to these questions. Personalize your vision of retirement in a way that matches your values and life goals as you carefully consider what your ideal retirement looks like.

Run an Initial Budget Plan for Retirement

Reviewing your budget or personal spending plan is something most of us agree we should all be doing but is easier said than done. As retirement approaches the budgeting process takes on a whole new level of significance. Once you’ve identified where your money is going, you can try to free up some extra money to save and invest for retirement. You can also go ahead and create a Budget Plan for Retirement to identify areas of spending like health care or travel that may be changing the most during your financial freedom years.

See If Your Retirement Savings Will Be Enough

Have you saved enough for retirement? This is a question that should be asked as early as possible in the planning process. Still, if you are in the final stretch to retirement and have not run a basic retirement calculator you aren’t alone. Reviewing all of your potential retirement income sources (401k, IRAs, pension, Social Security, etc.) will help provide an answer to this important question. It will also help you identify if any changes are needed to improve your retirement outlook.

Decide Where You Would Like to Live During Retirement

While asset allocation is an important factor in increasing your retirement savings, your retirement location is an important determinant of your overall life satisfaction. Think about where you plan to spend your retirement years. Will you be downsizing your housing situation or relocating? How close will you be to friends and family? There are a variety of important quality of life factors such as entertainment, health care, taxes, and cost of living that relate your retirement location decision.

Estimate How Much Guaranteed Income You Will Get From Social Security, Pensions, or Annuities

Deciding when to claim important benefits such as Social Security and pension (if eligible) depends on a variety of factors such as your planned start date, longevity expectations, health, and income needs.

Review Your Health Insurance Coverage Options

Obtain affordable and reliable health insurance coverage during retirement is a top priority for soon to be retirees. Not surprisingly, health-related costs can be a huge portion of the budget during retirement. If you have retiree medical insurance, go ahead and start reviewing your options and the associated costs. Other options include looking into COBRA coverage or visiting the site if you will be retiring prior to age 65 when Medicare eligibility kicks in. If you are in a high deductible plan with an HSA option, take full advantage of your ability to set aside up to $3,350 for individual coverage or $6,750 for family coverage (plus $1,000 for both if age 55 or older) of pre-tax dollars in a health savings account to help cover future costs.

Determine If It Makes Sense to Pay Off Your Mortgage

Paying off debt prior to retirement is an excellent strategy to reduce overall expense needs. Eliminating potentially problematic debt such as high-interest credit cards and personal loans is strongly recommended in the years leading up to retirement. It’s also wise to time the payoff of your car or student loans with the year you want to retire. However, determining if it makes sense to pay off a mortgage isn’t quite as easy of a decision to make in the years leading up to your retirement. Yes, it’s true that the retirement transition is usually easier to make from a financial standpoint if you are mortgage debt-free.

However, there are some advantages and disadvantages to consider as you examine your complete financial picture. Perhaps a bigger thing to consider is how you plan on using your home equity during retirement. Downsizing, relocating, generating rental income, and using a reverse mortgage are all potential options to consider.

Decide If Your Current Asset Allocation Matches Your Current Risk Tolerance and Time Horizon

As retirement nears your ability to stomach significant volatility in the investment markets is likely to change. That is why it’s essential to examine your overall retirement portfolio on a regular basis. You do not need to automatically start running from the stock market in the years leading up to retirement. Your total investment time horizon includes the years until retirement plus how long you anticipate living.

Consider Re-Defining Retirement

Sometimes it takes a little creativity to make retirement a reality. If your original vision of the ideal retirement does not match your current financial plan, don’t give up. You may need to make some difficult choices to adapt your lifestyle goals. But retirement is still within your reach.

Choose Your Team Wisely

For many soon-to-be retirees, building a team of professionals who provide legal, tax, and financial guidance is a helpful way to navigate these challenging decisions. Seek out qualified professionals who are always obligated to put your interests first and abide by a fiduciary standard.