Picture this: you have a big red circle around your retirement date on the calendar.
You have a running to-do list of all the around-the-house projects you cannot wait to finally finish.
You have even started thinking about the dream vacation you are going to take during the first few weeks after that big day has finally arrived.
It is exciting to think about retirement – but it’s also a time to focus on what matters most when it comes to your retirement.
Here at Consolidated Planning, our goal is to help you achieve all that is important to you as you begin planning for your post-retirement lifestyle.
There is a lot to consider when it comes to planning and transitioning into retirement. In this article, we’ll help you find some clarity in your path forward by identifying 7 key questions you should be able to answer before you retire.
#1 Where Will I Live In Retirement?
There are a variety of factors that contribute to how you might answer this question and it might surprise you that they are not all financial.
Your current and future needs will play a big role in your decision. As will your feelings about geography, climate, proximity to family, an international airport, cultural experiences, or access to outdoor activities.
You may decide to remain in your current home and make structural modifications that better meet your current or future needs. Or you may choose to relocate to a new area that is closer to family and has nicer weather.
You may want to purchase a vacation home to live in for a portion of the year or explore an ‘Over 55’ community.
The decision starts with a discussion around your desires with your spouse or partner and other family members. Housing is as much a lifestyle choice as a financial one.
#2 How Much Will I Want To Spend When In Retirement?
Does this question cause you to feel distress? Most people truly do not know the answer when it comes to spending.
In all of the anticipation of finally reaching retirement it can be easy to overlook the basic question of how much your newfound freedom might cost on a monthly basis.
Will you spend less? You may spend differently to be sure. If you are like most people, you may actually want to spend more in retirement than you did while you were working. Especially in the early years. However, there is a real risk of underspending in retirement if this is not clear.
Afterall, why save for years if you do not have a plan that enables you to spend on the things that you have spent years delaying?
With that being said, without mindful planning, you may find that you are unprepared to meet the spending demands of a retirement that lasts 30+ years. If you’re lucky enough.
There are some rules of thumb that may act as guidelines, but this is a deeply personal question.
#3 Will I Continue To Work In Retirement?
While the decision to stop working can feel exciting for many professionals, others may find that it is an emotional one.
Much of our identity, our social connections, and sense of purpose are deeply connected to our relationship with our work. You may wish to stop working as soon as possible due to fatigue from years of travel or other work-related stress.
Or you may find that a more phased approach with fewer responsibilities, allows for a more gradual transition to full separation from work.
A phased approach can provide the opportunity to earn some income while enjoying more time to pursue other meaningful activities. It can also allow space to prepare for other lifestyle changes like relocation.
Regardless of your preference, there are a variety of options available to continue working on your own terms if you are not ready to stop working entirely.
#4 How Much Lifetime Income Will I Have In Retirement?
It is critical to have a CLEAR estimate of how much reliable lifetime income you can expect to receive in retirement. It is also important to understand when these benefits become available to you.
The most common sources are Social Security benefits, pensions from private employers or civil service, and annuities.
Your age at retirement and when your benefits begin will impact the amount of income that you will receive over your lifetime. If you are married, that income may continue for both of your lives.
Because of this, you must carefully consider how best to maximize the value of what is available to you.
Sources of lifetime income can be expected to provide the funding for your essential retirement spending.
#5 How Much Will My Healthcare Cost In Retirement?
Medical expenses can be one of the largest budget items for new retirees. Throughout the course of retirement, they may turn out to be your single largest retirement expense. Especially if you plan to retire before reaching age 65. These costs can include premiums for Medicare or private medical insurance.
Do not forget to include Medigap insurance, the costs of services potentially not covered by Medicare such as dental and vision care, and any co-insurance or deductibles that must be met before coverage begins.
Healthcare costs have been rising faster than other retirement expenses as retirees have been living longer. This presents an opportunity for you to save by planning ahead for how these expenses will be funded.
#6 How Will I Handle My Investments In Retirement?
Your investments will play a significant role in your ability to maintain your retirement lifestyle.
Understanding each of the various investment accounts that you have and how it fits into your plan helps you better attain your post-retirement goals. Remember, each investment may have different rules, costs, and tax considerations.
As you prepare for retirement your investment strategy should consider more than just your tolerance for potential investment losses.
You will want to be aware of your portfolio’s balance between growth potential and income or liquidity for contingencies and other unplanned spending shocks.
It is also necessary to plan for how you will distribute from your portfolio to fund lifestyle spending beyond what will be covered by your sources of lifetime income.
Investing in retirement is not simply about achieving a high rate of return or beating a market benchmark. Instead, it must focus on risk management. Your portfolio must support withdrawals over an uncertain time horizon despite the ups and downs of the markets.
#7 What Does My Estate Plan Say?
Your desires around passing your wealth to the next generation, charity, or simply to your spouse at your death can help shape many of the other decisions that you will make regarding your retirement.
A properly executed estate plan helps ensure that your wishes will be carried out. It should be reviewed periodically to ensure it continues to meet your needs as legislation often changes.
Financial assets like life insurance and annuities pass to heirs via named beneficiaries as do most retirement accounts. These should be reviewed to make sure they match your estate documents. It may make sense to consider the use of trusts to provide for the administration of assets for the benefit of your heirs, or for yourself if you become unable to do so.
The key consideration is that your wishes are made known and clearly articulated in writing so that there is no confusion or resentment by your family.
Are You Financially Ready To Retire?
If you’re like most, what your retirement might look like is a bit murky right now. But this doesn’t have to be the case.
Unlike a vacation that may last a few days, or weeks, retirement is likely to last as long as the career you are leaving. If you are lucky, it could be even longer.
To begin optimizing your retirement planning, talk with an experienced planning professional at Consolidated Planning to review where you are now and where you want to be in retirement.
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Exp. 4/2027
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.
This material contains the current opinions of James M. Matthews and Consolidated Planning only. These are not the opinions of Park Avenue Securities, Guardian, or its subsidiaries.
