Exploring Key Retirement Questions for a Secure Future
By, Jeremy Reif, CRPS
Regardless of if you are 30 or 50, the idea of retirement probably crosses your mind regularly. Once we dive into our working years, retirement becomes the ultimate goal. It’s the promise that one day we’ll be able to reap what we’ve sown during years of hard work and dedicated saving, and many of us relish the idea of slowing down, changing pace, and finally having all the time we need to pursue passions and invest in relationships.
Retirement is arguably one of the most pivotal milestones you will reach in life. That’s why it’s so important to prepare for all aspects of the transition so you can enjoy the fruits of your labor. Take a look at these four decisions that will help you achieve a regret-free retirement.
1. When Will You Retire?
Whether you are forced to retire earlier than planned or you decide on your own, retiring before you are ready can cause plenty of regret. In fact, 30% of retirees admitted they would gladly re-enter the workforce if a job became available.[1]
If you decided to retire before turning 65, you probably had to find pre-Medicare coverage, which is often quite a bit more expensive than an employer-sponsored plan. By waiting until you turn 65, you will qualify for Medicare and not be forced to obtain other health insurance to cover you during the transition.
Financially, the earlier you retire, the fewer years you have to save and the longer you will have to live off of your money. If your finances are keeping you up at night or you are living at a lower quality of life than you are used to, you may regret retiring when you did.
Working even a few years longer can provide these valuable benefits:
- More time to accumulate savings
- More years to apply toward Social Security, which could result in a larger benefit amount
- Health insurance coverage through your employer
- Purpose and identity
- Stronger mental and physical health[2]
On the other hand, another common regret is waiting too long to retire. If you have enough money saved and you and your financial advisor have planned for every aspect of your golden years, you should consider retiring as soon as possible. The younger you are when you retire, the more energy and health you’ll have to enjoy retirement. Many retirees regret spending their best retirement years grinding away at work. Sure, they had more money when they finally did retire, but they had less time to enjoy it. The point is this: your situation is unique. Be sure to take a good, hard look at your financial situation to ensure your money will last, and don’t let your retirement fears hold you back.
2. Are You Planning To Pay Off Debt?
While it’s generally true that the less debt you have when you enter retirement, the better, the reality is that few of us will retire with zero debt. Reducing your consumer debt before retiring does help you lower your monthly expenses and enable your savings to grow and last longer, but it’s only one piece of your retirement strategy. For example, you wouldn’t want to throw every extra penny at your debt and leave nothing to save for retirement.
Instead, make a strategic plan to simultaneously eliminate your debt while still making consistent contributions to retirement accounts, adhering to a long-term investment strategy, and creating a prudent withdrawal strategy. Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first. Once you’ve eliminated credit card and auto debt, see how you can aggressively pay off your mortgage. Being mortgage-free could reduce your monthly expenses by up to a third and make a significant impact on how you spend your savings.
3. Have You Made A Retirement Budget?
You may have a hefty nest egg to carry you through retirement, however, you still need to exercise financial discipline to ensure your money lasts. Dipping too deep into your savings as soon as you retire could quickly break your retirement dreams. Practicing self-control to resist impulse buying and frivolous spending is important if you want to see your savings pan out as you planned them to.
However, these impetuous behaviors are not always to blame. It could be that you set a plan that sounded good on paper but just wasn’t realistic or flexible enough to allow for some stress-free splurging. So, when developing your retirement plan, create a realistic retirement budget, factoring in travel or hobbies, then work with your advisor to find a withdrawal rate that will stretch your money for as long as possible.
4. Do You Have A Plan For Your Time?
Free time is a major perk of retirement, but when you go from working full-time to not working at all, it can be a shock to your system. Saying goodbye to your career, your colleagues, and your routines can cause anxiety and depression. And if you have a spouse, you may go from having a few hours a day together to being with each other constantly. This extra time together is an opportunity to invest in your relationship and enjoy more time together, but having an abundance of time, either alone or with your spouse, can cause a feeling of inertia. But if you plan ahead to fill your time with activities that will fulfill you, you can avoid the negative emotions that can come with this life transition.
Do you want to know what activities result in a fulfilling retirement? A BMO study on retirement planning reveals that retirees who stayed busy and active, pursued independence, and volunteered their time were satisfied with their life. [3] One study of retirees even found that those who volunteered 200 hours a year were less likely to develop high blood pressure. [4] The takeaway here is to be intentional about your time in retirement. Make a list of things you want to do, places you want to go, and people you want to spend time with, then strategically map out the details so your goals become a reality. It’s easy to lose your identity when you say goodbye to your career, but filling your time and venturing out into new territory will help you build a new identity and give you something to look forward to.
Retire With No Regrets
No matter what your situation, it’s possible to enjoy your retirement without regretting the decisions you made. At Point Wealth Management, we understand that deciding when and how to retire is a difficult decision, but we want you to know that you don’t have to make the hard choices on your own. Our top priority is to point you in the right direction and give you the confidence to work toward financial independence.
[1] https://www.cnbc.com/2014/08/21/retirees-go-back-to-work.html
[2] http://www.medicaldaily.com/planning-retiring-early-consider-these-5-health-risks-first-247669
[3]https://commercial.bmoharris.com/resource/wealth-management/whats-your-retirement-game-plan/
[4] http://psycnet.apa.org/journals/pag/28/2/578/?_ga=1.177767717.1281536077.1488342343