Retirement planning is a topic that is often addressed in a strictly numerical context. A certain amount of assets must be accumulated and these assets are then turned into income that, hopefully, will last through the remainder of your lifetime. Sound familiar? While this can be a useful framework for conceptual purposes, it fails to address many of the non-financial intricacies, human emotions and behaviors that can have a huge impact on retirement readiness.
Defining a clear vision for retirement that includes both financial and lifestyle considerations is a critical first step. Planning for your future helps you make more informed decisions today, but planning out the next twenty, thirty or forty years of life can be an understandably daunting task. While many retirees have identified general goals, such as traveling or spending time with family, they are often far less clear on what constitutes a meaningful retirement. What’s more, many retirees are asked to make important decisions surrounding employer-provided benefits, Social Security and health care that can impact them for the rest of their lives. The magnitude of these decisions tends to overshadow lifestyle and time management considerations.
What happens when the phone stops ringing?
Transitioning from full-time employment to full-time leisure may be a jarring experience, even for those with an active social life and plenty of activities to occupy their days. Careers confer status and provide us with social networks and a sense of identity. When you leave the workplace, the phone calls and emails will stop. Your professional identity will change, so too will the relationships that you have with your former colleagues. It is quite likely that you will need to fill this void with new relationships, interests and goals. Spending some time thinking about this next phase, how you plan to engage the world around you, and what constitutes a meaningful retirement are best done well in advance of your departure date.
Identifying important goals and viewing retirement in stages, rather than as one long continuum is often helpful, as are new tools such as “Ready to Retire” from LIMRA that provide an opportunity to test drive a day in retirement. These tools may be helpful in clarifying important goals and objectives, identifying conflicting or competing ones and seeing how these goals may change over time. Once a framework for retirement has been achieved, establishing a realistic budget and making decisions on Social Security, health care and the like are much less stressful.
Following are a few non-financial considerations to ponder as you approach retirement:
- How do you spend time on a typical Saturday? Do you enjoy a variety of activities and interests, or is your time spent catching up on work?
- What activities do you enjoy currently and how will these interests change over time?
- Are there things that pique your curiosity or that you previously enjoyed but put aside?
- What interests do you share with your spouse or partner and how much time do you plan to spend collectively on shared versus separate interests?
- How important is it for you and your spouse or partner to engage socially with others?
- Is your social network comprised largely of people you have met at work? How important is it to maintain relationships with colleagues after you retire?
- Do you plan to remain in or near your current geographic locale? How will this impact your ability to engage in those activities that you find meaningful?
- What transferable skills do you possess, and how might you use these during retirement?
- Are your current retirement savings adequate to support these activities and interests?
It is also important to recognize that the emotions associated with accumulating wealth are very different from divesting it. New found concerns and anxiety about running out of money are common. This is a frequent area of discord in relationships, addressing these concerns may require patience and different methods of communication. Establishing a realistic budget and a flexible retirement income plan can help alleviate unnecessary friction.
A second, and no less important, part of this awareness extends to recognizing the risks faced in retirement. Some common risks include outliving your assets, having purchasing power diminished over time due to inflation, overspending, incurring unexpected costs associated with health care or long-term care, or seeing your investment portfolio drop sharply in value. There may be many others, including those that have always existed and some that may be unique to you.
One final consideration to being retirement ready is to remember that protection planning is just as relevant for retirees as it is for younger workers. The risks faced at younger ages, such as protection from creditors in a lawsuit are still present. Additionally, retirees may face increased health care or long-term care costs that are not typically faced by younger workers. It’s important to have an active risk-management program in place and ensure that your estate planning documents, beneficiary designations and titling of assets continue to reflect your intentions.
Retirement is a new and exciting phase in life to embrace, and a thoughtful retirement income plan can help ensure that you have adequate financial resources. Money alone, however, does not ensure a fulfilling retirement. How we spend our time, and with whom, our accomplishments, our failures, and the impact we have on those around us are how we’ll be remembered. Being retirement ready can help us better define our legacy.
John Male, CFP®
The Gassman Financial Group
G&G Planning Concepts, Inc.
The Retirement Maven ™
9 East 40th Street, Suite 1500
New York, NY 10016
Tel: 212-221-7067 Ext. 17