If you were to Google “how to financially prepare for…” guess what would come dead last? Retirement. Pregnancy, divorce, college, a recession, and moving out of your parents’ house all beat it on the list! But that’s a problem, because retirement is arguably more costly in the long run than any of those things.
There is an old verse that reads: where there is no vision, the people will perish. That might sound a little far removed when it comes to our retirement or, is it? Retirement may look different family to family, but it does have a serious impact on everyone, not just the retiree. The burden rests on everyone’s shoulders and its not just a financial burden, its the mental and emotional burden that comes with it. In addition, future generations struggle because good financial habits were not passed down.
There are many studies that link death (perishing) with running out of money. In fact, a study of 3,257 people found in US News indicated that 61% fear running out of money more than death itself. It’s been the cause of suicides by people that I have personally known and there are correlations that have been found in the timing between little money and death in old age. Planning with a vision towards our future can thwart a bad ending to your story and give new hope to your heirs. Tom Watson (founder of IBM) said something about his company that translates nicely regarding us having a vision for our own future.
When Tom was asked what he attributed to IBM’s phenomenal success he responded:
- First, we asked ourselves what we wanted to look like when we grew up
- Second, we asked ourselves how a company that looked like that acted and
- Finally the realization that unless we acted that way from the very onset we would never get there.
It might serve us to take another look at our retirement if its been a while because no matter how young—or old—you are, you should be proactively taking steps to plan through your retirement. To help with that we have prepared ten things you must do for a rock solid retirement.
1. Envision what your retirement will look like
Retirement doesn’t need to be the same for everyone! Just because your parents hit the links and played dominoes doesn’t mean you need to. If you haven’t taken time to think about what the day-to-day life of retirement will look like, you should. Wondering what that means? Well, first, does retirement even mean that you’ll stop working? Not necessarily. For your financial health as much as for your sanity, explore your options.
Consider finding something a dozen hours or so a week that you’ve always dreamed of doing, whether that looks like teaching a couple classes at your local community college, doing part-time ministry at your church, or exploring the possibility of freelancing or consulting in your chosen field. You’ll want to take stock of your hobbies too–how are you going to spend your spare time?
Having worked exclusively with retirees as a financial advisor I can tell you the two things they struggle with most is:
- Getting bored because they have lost the identity they were accustomed to and
- Losing their dignity because their children treated them like they had little or nothing to offer
Having a plan for an active retirement will save you from a lot of this misery. Remember, we never REALLY retire. We simply live out another chapter of our lives and how you live that chapter depends largely on how you plan it to be.
2. Make your retirement budget
Of course, the basics along with your extra curricular activities all factor into your retirement budget. Make a budget and be realistic! Just like you plan your budget now, plan a monthly budget for when you’re retired. Of course, things will change both in your income and your expenses. You’ll need to carefully think through all of those changes—and you’ll need to be prepared to adjust that budget over time as you continue planning your retirement. After all, the one thing you can always plan on is change. Keep in mind that on average, retirees need at least 70% of pre-retirement income to maintain the same standard of living in retirement. You can find a FREE budget tool HERE that can help you get started. As you create that budget you’ll also need to…
3. Find out about Social Security benefits
On average, social security only pays about 40% of what you earned before retirement. Can you imagine living on less than what half of what you make right now? Yeah, neither can I. Take time to estimate your individual benefits by using the Social Security Administration’s Retirement Estimator found HERE. You’ll need to make up the rest through savings, your IRA, or other income (like that part-time job).
4. Plan for the worst
Just like you have rainy day savings now, you need to have that money in retirement too! You’ve got to make sure that you have incorporated a solid plan for savings into your budget in order to be prepared for unforeseen medical expenses, broken-down cars, falling in roofs, and more (like kids who move back in). On top of short-term budget wreckers like surgery, you’ll also need to consider the possibility of long-term expenses like assisted-care facilities, home healthcare, or ongoing medical treatments.
5. See your doctor and do what you can to stay fit
Like I mentioned above, it’s important to stay in the know on your personal physical health. Awareness of any ongoing medical issues as well as things like family risk for certain conditions is critical to planning for and managing your budget—and your overall retirement plans. It’s also important to take practical steps now to overall physical health. If you haven’t already, consider committing to a moderate exercise regime that includes plenty of stretching and slowly altering your diet over time. This will not only save you money in retirement, it will make the time you’ve worked so hard for far more enjoyable.
6. Determine your health insurance options
This is hugely important! Obviously, your retirement will change your options, and paying out of pocket can be extremely expensive. Make sure that you set aside time to explore your choices for retirement, especially if you’re planning on stopping full-time work before age 65, when Medicare becomes an option.
7. Eliminate debt now
This should already be at the top of your financial to-do list, but as you approach retirement, eliminating your debt becomes even more important. It may mean adjusting your lifestyle in the short-term, but it will save you so much in the long-term. Going into retirement debt-free is one of the best things you can do for yourself, your spouse, and your family as a whole.
8. Minimize taxes in retirement
Make sure you are exercising tax loss harvesting as you draw your money in retirement and above all have a plan to efficiently draw from your assets. Keep in mind that all investments and savings vehicles have different characteristics like taxes, fees and expected rates of return. These differences play a big part in which account should be drawn on first, second etc. This can get pretty complicated and I have seen the differences in these choices range from hundred’s of thousands to over a million dollars! This IS a big deal and most have no clue how to solve for this.
9. Revisit your estate plan—or create one if you haven’t already
This step often seems emotionally overwhelming—but it doesn’t need to be! Planning your estate doesn’t mean you think you’re headed to heaven any time soon. It’s more about exercising good stewardship over the things God has blessed you with over your lifetime. As you dive into estate planning, keep in mind the next generation. Consider what will serve them and what will sour them. Above all they should inherit the praiseworthy blessings God has given you in your lifetime.
10. Finally, ask a lot of questions
No matter where you are there is always a positive change to be made. We’re here to help! Take time to talk to someone about your future and weigh out the information you receive. To help with this process you can see a FREE informational webinar.
We want to hear from you! What are you doing now to get ready for retirement? Tell us the financial steps you’re taking, the fun daydreams you’re having, and the practical habits you’re setting up now.
No one knows your money like “U”!
p.s. If you want a privileged opportunity to see a conversation from one financial pro to another you were not meant to hear then click HERE to get the FREE chapter right now!
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Awesome information that is timely for those considering retirement!