The multiple faces of planning for retirement
Retirement is one of the most important things you’ll ever do. Because many of the decisions you make for retirement will affect you for decades, it’s a good idea to approach it with checklist in hand. Here is a list of things you should do before retiring.
- Check to make sure retiring is really what you want to do. A neighbor of mine worked for a company that required retirement at age 60 or after 30 years, whichever came sooner. Those two dates came at the same time for him and while he’s not actively complaining he potters around his yard looking like he’s lost even after a couple years of retirement. He probably would have been better off finding another career since remaining at his place of employment wasn’t an option and yet 60 is awfully young to have no purpose (if indeed there is ever a time when it is okay not to have one). In fact, for many people retirement isn’t something they look forward to and if you’re one of those, finding a way to remain at your current employment or finding a substitute either through volunteering, beginning a business or starting a new career can provide the stimulation to make retirement fun. In addition, delaying retirement can allow you to continue to add to your 401(k) or at least put off getting disbursements from it, and it can delay your need to begin collecting Social Security so you can maximize those benefits. If you’re not sure that retirement is for you, some places allow you to cut back without completely leaving the workplace. In effect, they give you the opportunity to try out retirement without committing to it.
- Decide if you can afford it. Some people will reach retirement age and have to retire, either because they are ill or because their spouse is ill. For everyone else, retirement shouldn’t just be a date on the calendar, it should be when you have the finances and the desire to allow you to do so. Create a retirement plan and test it by trying to live off what you’ll be receiving in benefits. Check with Social Security to find out what your benefits will be from them. Then look at 401(k) plans, pension, savings and other retirement accounts. From that figure, determine whether you can live on those funds or if you would be better off postponing retirement for a time. Remember that these funds are likely going to have to fund not just today but a tomorrow that is likely decades down the road. If you’re healthy now, you may not be at some future date and you should plan around that. Financial experts project that the average couple will need $250,000 for healthcare costs alone and those costs are above and beyond the costs associated with long-term care. If you don’t already have a financial planner, hiring one now can make sure you haven’t missed something crucial in your planning and can help keep you on track.
- Figure out what your retirement expenses will be. If you’re retirement plan includes traveling, keep that in mind when you’re budgeting for retirement. The cost of retirement can drop a bit when you are no longer commuting to work or paying for lunches, work attire etc but other costs can rise such as health care costs that are being partially or fully shouldered by an employer now but won’t be in the future. Be realistic in what you’ll save and what will replace those costs.
- Plan for two phases of retirement—when both spouses are living and when only one survives. Some pension and retirement plans die out when the beneficiary dies. That can mean a substantial cut in income and benefits when one or the other spouse dies.
- Revisit your housing situation. When you initially purchased your home it was probably to make sure your kids could go to the best schools or because it was within commuting distance from work. Now that those original reasons for choosing your home no longer exist, take another look at your current housing choice but look at it with an eye to how much it costs to remain there, whether it fits your current and future lifestyle, whether its location will allow you to pursue new interests and of course whether or not you can comfortably age in it. Retirement is a good time to reassess your living arrangements and make a change if one is needed.
- Look for options for staying busy. You can only sit on the couch and veg for so long. Then you’ll want to have something to do to stay busy, active and engaged. Plan accordingly so you’ll have options for doing so. Spend time seriously contemplating what you would do with an open horizon of time and how that time can be used to fulfill your retirement hopes.
Here’s a long list of other things to do to plan and prepare for retirement.