For many of us, retirement has been a concept that was far off in the distance. As time inevitably marches on, one day we realize that we are on the back nine of our careers. Dinner party conversations may no longer revolve around buying that first house, having babies, or advancing in our careers but rather about when and where to retire. Getting ready to retire and being able to retire when we want has become front and center.
The best way to achieve any goal is by implementing a plan. Whether you are 20 years or two years from retirement, it is never too early or too late to put a plan in place to achieve your retirement goals. We want to share with you some of the key considerations for a successful retirement.
Part I: The Financial Preparation
- Set Your Goals: What do you want to do? Retirement is not a seven-day weekend or a 365-day vacation. It is essential to prioritize your retirement goals and make sure they are realistic. These goals may change over time, so they should be revisited frequently or as life changes. A change in goals may require an adjustment to the plan.
- Cash Flow Planning: How will you fund retirement? An analysis can be developed to provide insight into what future spending might be and how much income will need to be replaced. A safe portfolio withdrawal rate will inform how much other non-discretionary goals like travel, gifting to kids, charitable donations, or specific legacy goals can be funded.
- Tax Planning: How will your tax situation change in retirement? After reviewing a multi-year tax analysis, there may be strategies or steps to take before or early in retirement to take advantage of years where income will vary. There may also be ways to position the portfolio to provide more tax flexibility in retirement through diversifying different types of investment accounts (e.g., Brokerage, IRA, Roth IRA, HSA).
- Insurance: What risks must be mitigated today that could derail retirement success? Some common things to consider are whether more or less insurance is needed today, whether there is a need for a long-term care scenario in the future, and whether there is a need for additional liability protection.
- Estate: What are your final wishes? A financial plan for retirement or any other goal would be incomplete if you have not formalized your preferences (Powers of Attorney, Advanced Medical Directive, Will, Guardianships, Trusts, etc.) should you become incapacitated in retirement or at any age.
While not exhaustive, this list incorporates some of the most important aspects of retirement planning. Because there is no one-size-fits-all manual for retirement, it is helpful to develop a personalized retirement plan tailored to your unique circumstances.
If you are many years from retirement, we hope you have gleaned some useful information about retirement planning. If retirement is sooner rather than later for you, please read on!
Part II: The Mental Preparation
If retirement is within sight, you may have the financial preparation piece figured out (see above!), but perhaps you have not focused on mentally preparing for retirement. Many mental health experts believe the components of happiness can be boiled down to three things: security, purpose, and connection. Retirement is a time when many of those components may be shifting. You may want to prepare to make some adjustments in your personal life as purpose and connections may look quite different in retirement.
Purpose: For many years you may have found great purpose in your role at work or raising your kids. Upon meeting someone new, you may have become accustomed to introducing yourself as “an attorney with ABC Firm” or “Caroline’s mother/father,” as your identity was closely tied to those roles. Your identity may now be shifting as you become “a volunteer with 123” or “an avid gardener.” Once you retire, many more avenues open up where you might find purpose, whether in the community, with your family, or pursuing a hobby that has long been put off. As your purpose shifts, it is important to understand that the change is not a good thing or a bad thing – just a different thing.
Connection: Our jobs provide us with easy, accessible connections to our colleagues and an organization bigger than ourselves. When we retire, we may need to put more effort into creating new connections. We may become friendly with neighbors with whom we only passed by briefly in the morning or the evening, and we may have time for book clubs, a regular Pilates class, or deeper involvement in spiritual organizations.
As you think about retirement, ask yourself, “What does a great typical day in retirement look like?” Where are you? What are you doing? Who are you with? The answer or the picture you create in your mind can help you prepare for all aspects of retirement. While every person’s answer is different, everyone deserves to live their ideal life in retirement.
