Eight questions to consider when planning your retirement.
Effective retirement planning is years in the making. But before you officially embark on the next stage of your life, consider these questions to gauge your readiness:
1. Have I defined my day-to-day life and long-term goals for retirement?
Know what your overall purpose and future goals are – what would you like to do and achieve in your retirement years? Think about what your day-to-day life will look like outside of work, and how it might align with your various interests. For instance you may want to golf regularly, travel the world, move somewhere new, volunteer, or even maintain a part-time job. Once you have a clear picture of how you will spend your time in the next stage of your life, you can develop a financial plan to achieve your dreams.2. Am I confident that I've accumulated enough to reach my goals in retirement?
Knowing what you want to do in retirement will help you assess whether you can feasibly live out your purpose within your means during your retirement years. Consider your resources including all accounts allocated toward retirement, as well as total cash inflows, i.e. salary, Social Security, pensions, rentals, and other sources of cash income.
Also take a look at your expenses year to year, including living expenses, taxes, insurance, and liabilities. It’s wise to make an educated estimate of future expenses based on variables like market changes and inflation, as well as life expectancy and health status. You may also want to consider setting aside an emergency fund that covers your expenses in case something unexpected happens. To confidently and comfortably retire, it’s crucial to carefully plan so that you can reach your goals while covering your expenses.
3. Are my resources appropriately allocated for sustainable distributions?
Each individual has a different level of risk tolerance. Knowing that high risk brings the potential for greater gains but also the potential for greater losses, take an introspective look at the risk level that you are comfortable with. Determining a practical risk level for your unique situation involves weighing considerations like the retirement lifestyle you desire and how comfortable you are with volatility. Your risk tolerance will inform how you allocate your assets to maximize your ability for sustainable distributions in retirement.
4. Have I considered my withdrawal strategy?
Thinking about how you’ll withdraw money in your retirement, it’s important to consider timing and tax implications. Determining how much and when you should pull from your various accounts must be balanced with covering your expenses while understanding tax implications. Doing so can position you to maintain a high level of confidence in your purchasing power throughout retirement.
5. Do I have a plan for claiming Social Security?
Realizing financial independence is key, so it’s wise to strategize your Social Security plan in order to achieve that independence. The monthly benefit amount you receive will vary based on whether you decide to collect at the minimum age of 62, your full retirement age based on the year you were born, or up to age 70.
Analyze whether delaying Social Security makes sense for your unique situation, or whether you may achieve your goals sooner by electing to receive benefits earlier. There are also tax considerations, health coverage implications, and other variables to weigh when strategizing your Social Security plan.
6. Have I taken healthcare costs into consideration?
Have a game plan for covering healthcare-related expenses. Knowing that medicare takes effect at age 65, it’s important to plan to bridge the gap in insurance premiums if you intend to retire earlier. Another factor to consider is the cost of long term care. Primary options are typically long term care insurance or self-insuring.
7. Have I considered intentional giving?
What causes are most important to you? If you choose to make a charitable lifetime giving plan, you can begin to see the effects during your lifetime and take advantage of income tax benefits. These can carry through to retirement, and are wise to plan for ahead of time.
8. Have I proactively planned to protect my estate?
Documenting your final wishes is one of the best ways you can take care of your family in the event of your passing. If steps are not taken to document your estate, it can result in probate for your family. Probate can be a lengthy, stressful, expensive process.
Proactive planning and completing a will and/or trust typically allows your beneficiaries to settle your estate more easily. Designating a power of attorney and preparing an advance healthcare directive can also be beneficial as part of your estate plan.
In addition to formal documentation regarding end of life, it’s important to ensure that your beneficiaries are aware of your final wishes so that nothing comes as a surprise. Provide them with contact information for your financial advisor, attorney, or other parties that they may need after your passing. Make sure that they know how to access any safety deposit boxes or home safes that contain important information or assets.
Retirement planning brings several considerations. At Certus Wealth Management, we are committed to helping our clients navigate all of the variables related to reaching their long term goals.
To discuss your unique situation, please contact us.
This content is provided for educational purposes only, represents only a summary of topics discussed, does not constitute any personalized investment advice or recommendation, and represents only the views and opinions of the speakers which are subject to change without notice. Investing involves risk including the potential loss of all amounts invested.
