Are You Ready To Retire? Answer These 7 Questions First

The start of a new year sparks fresh thoughts, ideas, and inspiration. For you, this might be the year you consider retirement. Making the leap to retirement is a significant step in your life both mentally and financially, and you want to enter into this new phase of your life with both eyes wide open. 

Before you say goodbye to your 9-5, carefully walk through the following questions.

1. Do you have a spending plan that works?

Retirement is one of the largest savings goals of your life. You’ve dedicated decades to accumulating enough wealth to support your desired lifestyle, therefore before you retire, you need to know that your expenses are taken care of. This process involves analyzing your income streams against your projected expenses. 

Start by listing your income channels. 

• Social Security (use a tool to calculate your projected benefit).
• 401(k)
• IRA (Traditional, Roth, SEP, Simple, etc.)
• Other investments (brokerage account, real estate holdings, rental properties, etc.)
• Annuity
• Pension
• Cash reserve

Then, take a look at your estimated retirement expenses.

• Housing 
• Food
• Utilities
• Taxes
• Debt
• Insurance
• Travel
• Entertainment

Once you have customized these lists to reflect your situation, take a look at the outcome. Does your proposed spending plan work? Have you accounted for big-ticket items like a move, trip, or large purchase in the first few years of retirement? Do you still have room to build up an emergency fund and other savings goals? Have you taken some time (2-6 months) to test out your spending plan?

Financial preparation is a fundamental ingredient for a solid retirement plan and can offer more confidence as you make the transition.

2. Have you made a plan for your health?

Healthcare costs can eat up nearly 15% of your retirement budget. Fidelity estimates that a retired couple will spend $295,000 on healthcare costs alone in retirement and that number is only projected to rise, which means pre-retirees need to create a plan to account for these costly expenses. Ask yourself,

• Do you have a plan for health insurance? (remain on your current plan, obtain it through a new employer, get coverage under your spouse’s plan, or enroll in Medicare).
• Have you researched your Medicare options and made a plan for the coverage you need? (Original Medicare, prescription drug coverage, and supplementary coverage through an advantage plan or Medigap plan). 
• What health-specific savings measures do you have in place? (health savings account, long-term care insurance, emergency savings, additional investments, etc.)
• Are you prepared for any long-term care needs?

It’s vital to account for your changing health needs, especially as you age. You want to make a plan when times are good, instead of scrambling when health needs arise. 

3. Is your estate plan up to date?

It’s prudent to update your estate plan regularly and after a major life event, and retirement certainly fits the bill. With your assets changing places and income streams shifting, you want to make sure that your assets are properly titled and you have the right beneficiary designations.

Retirement is also a good time to check in on your power of attorney and medical directive designations. Are there any changes you need to make? Should you have a conversation with each person about your wishes moving forward? Do you need to alert them of any changes to your health or overall plan?

Retirement marks a time of change. Initiating conversations with family and loved ones concerning your estate can help you and them effectively navigate those difficult questions. Open dialogue will ensure that everyone is prepared should something unexpected occur. While talking with family about estate planning is difficult, it’s vital to bring honesty, openness, and transparency to the situation. 

4. Is your debt-clock still ticking?

Retirees should do their best to eliminate any debt before sailing into their golden years. That means paying off your mortgage, car, personal loans, student loans, credit card debt, etc. Debt can hinder your cash flow in retirement and constrict some of your flexibility in terms of your spending, saving, and investing. 

Be conscious of the debt you still have and make an intentional plan to pay off as much as possible before you retire. While you might not be able to fully pay off your mortgage, for example, you should prioritize eliminating high-interest debt like credit cards, auto loans, and personal loans. 

You don’t want to have to use your Social Security check to pay down your credit card bill each month—you’d rather use it to support your lifestyle. Living a debt-free retirement gives you more freedom and flexibility in your plan. 

5. Have you accounted for your time?

Filling your days is among the most difficult components of retirement planning. You want to find fulfillment, meaning, and purpose in your life, and it can be a challenge to discover what that means to you at first. Consider the following questions. 

• Will you continue to work, whether full-time or part-time? 
• Are you ready for an encore career?
• Can you lean into volunteer work?
• Is there a new skill you want to learn or a passion project you want to embark on?
• How will you stay physically fit?

Building a new routine is a challenge for many new and seasoned retirees alike. For decades, you’ve had your days drawn out for you, and curating something new will likely take some trial and error. You want to bring intention and care into your daily life and to do that, you should spend your time on the people, places, and things that mean the most to you. For you, that might mean Saturday morning breakfast with your grandchildren, weekly volunteering, and working part-time at a local shop. 

Don’t underestimate thinking through your daily habits. Many people think about their retirement lifestyle in terms of their large-scale wishes like a trip to Europe, a golf course membership, and long lunches with friends. But these things, while important, aren’t necessarily part of your daily life. What’s left once you are tired of eating out at the same place or exhausted by the early t-time or if you’re unable to travel? 

You’ll find your retirement lifestyle in the small moments and the daily habits you build. Take time to think and test out these ideas to help you build a retirement life you love.  

6. Are you mentally prepared to retire?

Retirement can take a toll on your mental health. It’s critical to gauge your thoughts and feelings surrounding retirement and what it means for you. Many retirees find it difficult to adjust to the new way of life, especially in the beginning. A few ways to help are,

• Maintain and form new social connections.
• Stick with an exercise routine.
• Do your best to eat healthily.
• Create a daily routine you enjoy.
• Give back through volunteering and charitable donations.

Remember, retirement is a personal journey—one that you have to be ready for. Your ideal timeline might be different than your spouse, friends, or coworkers, and that’s okay. As long as you are true to yourself and your goals, you will be able to do retirement your way. 

7. Do you have a written financial plan?

A written financial plan can bring more confidence and care to your financial life. According to Schwab’s Modern Wealth survey, 63% of people with a written plan felt financially stable and only 28% of people without a plan shared that same comfort. 

Even beyond financial stability, the same survey found that those with a plan were more likely to consider risk in their investments, regularly rebalance their portfolios, and ultimately feel certain in reaching their financial goals. Positive action tends to beget positive results. The more you can engage in your plan, the more likely it will reflect your true values and goals for the future. 

We love helping clients curate a retirement plan uniquely suited for their goals and dreams for the future. A written financial plan can catalyze your confidence and help you walk with purpose into this new phase of your life.

There are numerous nuances in your retirement plan, from your investments to your lifestyle to your health; there is always something to think about. Having the help of a trusted professional can give you peace and clarity to dive into this new adventure as prepared as possible. 

Is retirement on your horizon? Schedule a 15-minute call with our team to talk through your unique vision for your golden years. We can’t wait to serve you.