Life can pass quickly when you are occupied with work, family matters, and the never-ending to-do list. Before you know it, your retirement years have arrived sooner than expected. No matter your age, you should take time to reflect on what a fulfilling retired life means to you?
Many people simply say “I want $1 million or $2 million by retirement.” However, unless you envision your life without work and what that entails, the dollar amount you cite likely has little rationale and meaning behind it.
As you approach retirement, consider asking yourself these seven questions so you can feel confident and empowered to live your most rewarding life in this new chapter.
1. What Does Your Ideal Week in Retirement Look Like?
You may be eagerly anticipating the days ahead when you no longer need to rise at 5am and rush out the door by 6:30am to arrive at the office by 8am. Even without a commute, the thought of life without deadlines, pressure, and alarm clocks can be very appealing. However, after doing this routine for some time, you may have become accustomed to the daily grind.
Consider taking time to envision a week in retirement where you have nothing scheduled at all. How would you like to spend your time? How might you structure your days? The routine of work life can have benefits, so it may help to outline your ideal week in retirement so you can continue waking up with purpose every day after leaving the workforce.
Take a calendar and fill out an ideal week and ask yourself some of these questions:
- What time would you wake up?
- How often would you exercise? What is the best time of day for you?
- What kinds of activities would you do throughout the week?
- Who would you want to spend your time with?
- How often would you cook vs. go out to eat?
Of course, nothing is set in stone, but beginning to visualize how your days will look in retirement can be an enlightening exercise.
2. Will You Work at All?
Many people decide to continue working on a part-time basis, do some consulting work, or volunteer before fully retiring.
You may have grown to truly enjoy your daily work over your prime career years and don’t necessarily want to stop working entirely. Or you may be a business owner who will simply reduce hours. Another potential option is to stay with the company you’ve been with for 30 years in a consulting role, working 5-10 hours per week with a more flexible schedule.
Earning extra income in your early retirement years can cover travel costs, a new car, gifts for family, or other one-time expenses that would otherwise involve dipping into your investment portfolio.
Visualizing how part-time work could impact your financial retirement plan is one of many variables you can model in the NewRetirement Planner.
3. Do You Fully Understand Your Regular Living Expenses?
With steady income during your working years, especially at your peak earning time, tracking all expenses on a weekly or monthly basis may not have been a top priority. However, if you plan to stop working completely, you may feel more anxious without consistent income from a paycheck every two weeks and a clear understanding of your spending habits.
Examine your recent credit card bills and bank statements to get an idea of average monthly expenses. Also consider sporadic costs that arise over the year, such as annual subscriptions or semi-annual insurance payments.
Reviewing spending patterns with your partner doesn’t have to be dreadful. Motivate yourselves by planning something enjoyable afterwards – like a movie, dinner out, or drinks!
You also don’t have to do it alone! The NewRetirement Planner enables you to model your expenses through the Basic Budgeter and Detailed Budgeter, as a PlannerPlus subscriber. You can reflect your current spending while also modeling how your spending might change in the future, by adding expenses for different phases of your life, including:
- Working Years: If you are still working, these are your current monthly expenses, leading up to retirement.
- Early Retirement Years: Typically the first 5-10 years of retirement spending where you may be traveling more, going out to eat more and just doing more of what you always wanted to do in your spare time.
- Later Retirement Years: Think ages 75-80 and beyond. You may not be traveling as much or as far as you had in your early retirement years. Things may start slowing down and you may not be doing as many of the activities that are more costly. Health issues may arise and may limit your ability to do certain things you once enjoyed.
These phases are often referred to as the “Go-Go, Slow-Go and No-Go Years” and can provide some additional insight on potential spending patterns you may experience in retirement.
Get more tips on how to plan for retirement expenses.
4. Are Gifts or Financial Support to Family a Possibility?
When projecting retirement spending, you likely focused on regular monthly fixed and variable expenses. However, did you also consider potential future support for your kids, grandkids, siblings, or others?
You may wish to treat your entire family to an annual vacation, where you cover the costs for everyone. Or perhaps you know your brother or sister is likely going to need financial assistance in the future and you want to plan ahead for that cost.
Be realistic about how many people you can sustainably support in retirement. Any financial gifts will directly impact your savings and change your spending calculations.
Note: In the Planner, you have the ability to model one-time expenses in the future, like gifts to family members, to see if it is feasible as part of your overall retirement plan.
5. Where Do You Want to Live?
Selecting the optimal retirement location can be a financial decision, lifestyle choice, or both. For most households, housing is the largest expense and asset. As a result, your place of residence can greatly influence financial security and contentment in retirement.
Some possible considerations include:
- Staying in place: Your mortgage is paid off, your family is nearby, you love your home and there’s no reason for you to move, so why do it?
- Relocate closer to family: Perhaps your children and grandchildren are in Pittsburgh and you’re in San Francisco. You’ve been waiting for the day you can finally retire and move closer to your family.
- Relocate to a no-income tax state: Perhaps you’re tired of the high taxes in your current state and you’ve been anxiously awaiting the time you can move to a no-income tax state like Florida, Texas, or Wyoming.
- Sell and rent: You may have flexibility in choosing where to live after retirement, but the ideal location is still undetermined. You decide to sell your home and rent in various cities over the next year or two until settling on a place that enables your most fulfilling retired life.
- Downsize: You and your life partner realize that a five bedroom, three bath, three floor house isn’t going to be necessary for the two of you for the next several decades of retirement. Moving to a smaller home where you won’t even need a mortgage (due to the equity in your current home), may lead to a more content life in your retirement years.
6. How Do You Envision Your Social Life?
Colleagues at work can evolve into an extended ‘work family’ as time goes on. Have you considered how you’ll nurture your social connections during retirement?
The Harvard Study of Adult Development, one of the longest-running studies of adult life, found that strong social connections are associated with a longer and happier life.
Some social activities to consider include:
- Hobbies: You finally have time to continue doing more of the activities you’ve always enjoyed, like tennis, cooking, writing, reading or painting. You may also decide to pick up a new activity. Who doesn’t want to play pickleball these days?
- Community: Stay active in your community by joining clubs, volunteer organizations, or community groups that align with your interests.
- Life-long learning: Did you always want to learn a new language? Did you always want to read a new book each month but never found the time? Taking a class at a local college or library or joining a local book club allows you to meet new people and perhaps make some new friends along the way.
- Be a regular: Frequent a particular coffee shop, restaurant, gym, or barbershop regularly, as this allows you to become familiar with the people there. Establishing connections with familiar faces, even through brief interactions, can cultivate a strong sense of community.
Remaining actively engaged, pursuing your passions, and staying involved can help you lead a fulfilling and joyful retirement.
7. Have You Created a Holistic Retirement Plan?
In addition to considering what you are retiring TO, it’s always crucial to address the financial aspects of your retirement. This may include:
- Do you have adequate savings? The answer to this question is not straightforward. It is not about having a specific dollar amount. Having enough is a calculation involving the intersection of projected expenses, income sources like Social Security, and a large number of assumptions like how long you are going to live, what will happen with the economy, and so much more.
- Do you have adequate savings for a worst case scenario? Let’s state the one thing we do know about your future: Things aren’t going to go according to plan. So, if you want a secure future, it is a good idea to plan for the worst case scenario and make sure that you are comfortable if inflation sky rockets or the market crashes right before you were hoping to fund college expenses for your children. The NewRetirement Planner enables you to build different scenarios to pressure your future financial stability under different conditions.
- Can you afford healthcare? : If you leave your job before age 65 (before Medicare eligibility), how are you going to obtain health insurance? Or if you are Medicare eligible, which Medicare health plans make the most sense for you?
- And, what about long-term care?: It’s not a pleasant topic, but what if you start to experience cognitive decline or another serious health event? Do you have a plan in place to address those issues? How will you pay for more specialized care, like an assisted living facility or memory care?
- Investment Strategy: Should you adjust your investment portfolio to better align with your current life stage?
- Estate Plan: Do you have Wills, Power of Attorneys and a Living Will in place? Do you need a Living Trust? When was the last time you updated your estate plan?
Many of the financial aspects of your retirement can be effectively managed using the NewRetirement Planner. This tool allows you to plan for future medical costs, long-term care expenses, assess your investment returns over various timeframes and more, enabling you to optimize your financial readiness for retirement.
By taking a comprehensive view of how you intend to allocate both your financial resources and your time during retirement, you’ll be better equipped to make your retirement years a realization for your lifelong dreams.
