What Questions Should I Ask Before Retirement?

This summer, I was thrilled to celebrate my mom’s next step in life’s journey – Retirement. While many people might be yearning for the day they can enter the “work optional” lifestyle, officially taking that step can be very overwhelming and anxiety-inducing. Here are some questions to ask yourself as you begin to transition into Retirement:

Do You Have a Strong Picture of What You Want Your Retirement to Look Like?

We often get so bogged down in the numbers of retirement (How much do you have saved? How much will you need? Etc.) that we sometimes forget one of the hardest components of entering retirement – what will you be doing with your newfound time? According to a recent study by the National Institutes of Health, about 6% of Americans age 65 and older suffer from depression, often stemming from feelings of isolation and loss of identity from being outside of the workforce.

To help ensure you are mentally prepared for retirement, we recommend you have detailed answers to three questions:

1. Where are you?
2. Who is with you?
3. What are you doing?

While everyone’s answers to these questions will be different, taking the time before you officially hit the retirement button to fully think through what you expect in your day-to-day life moving forward is vital to making sure you stay active and engaged during this new phase of your life.

Do You Understand the Costs?

When you’re in charge of your paycheck, it’s important to know how much you are going to need to cover. A good rule of thumb is to assume you will need around 80% of your pre-retirement income to cover your day-to-day living expenses.

Of course, this number could be more or less depending on your unique situation and personal spending habits or needs.

It is also important to consider other retirement costs that are often overlooked, namely those associated with housing and health.

While many homeowners aim to have their house completely paid off by the time they retire - an extremely beneficial goal - there are other housing costs that pop up in retirement you might not think about. For example, is your house handicap equipped in the event that your mobility deteriorates? Do you have a plan for any needed renovations to make sure you will be able to use and maneuver around your home safely? Taking possible future home improvement costs into account when planning your future can help ensure the money is there when you need it.

Furthermore, we all know that medical costs will be an expensive part of retirement, but many people do not have a plan for if they need more significant care at end of life. While 52.3% of people are expected to have a long-term care need at some point in their lifetime, 83% of long-term care help is provided by family members or friends. Proactively planning for your long-term care needs is an imperative part of budgeting for your retirement costs. 

Are You On Track to Have Enough Saved?

Running a simple “Retirement Readiness Projection” can help determine whether you are on track for retirement, and if not, what you need to do to get on track. If you aren’t on track, have no fear - there may be some alternative options to help you prepare, including:

• Rethinking how much you’ll actually need in retirement
  • Will you be downsizing to a smaller home? Will you be relocating to an area with a cheaper cost of living? Where could you cut additional costs to make retirement life more affordable?

• Considering pushing back your retirement date to give you more time to save
  
  • Delaying your retirement by even a year or two can have a significant impact on your retirement readiness. One more year of working means one more year of saving, and one year less of living expenses you’ll need to cover through your savings.
    
• Don’t want to delay retirement? What about easing into it through part-time work?
  
  • Finding a part-time position that can help cover your day-to-day expenses so you can delay tapping into your savings can also go a long way to making sure your funds last through your retirement years.
    
• Don’t forget about Social Security
  • While you may be hearing that it’s going bankrupt, don’t count Social Security out just yet. We fully expect it to be around for the long-term, though you will likely see some changes to the system, such as new definitions for meeting Full Retirement Age.
    
    

Overall, while you’re still in the workforce, it’s important to save, save, and keep saving. If you’re over 50 and have the capacity to do so, take advantage of the catch-up provisions in your retirement plan which will allow you to contribute above and beyond the standard savings limits.

Are You Investing the Right Way?

Check the funds you are investing in to make sure they are still the right choices for you. As you near the date that you’ll need to start pulling from your savings, you want to make sure you are adding more protection to your investment line-up. However, don’t forget that you do still need your money to grow, even in retirement. Taking the time to review your investment mix, how comfortable you are with the market ups and downs (or your “Risk Tolerance”), and how much time you have before you need to start using the funds, can help to ensure you aren’t exposing yourself to too much or too little market risk.

Retirement should be an exciting adventure and taking the time today to think through each of these questions and map out your game plan, can help ensure you have a smooth and successful transition! In a follow-up post, I’ll be sharing some input and interviews with a few folks enjoying their “golden years” to get their take on the retirement lifestyle.