Retirement means many different things to everyone. It’s generally the goal for most people to do something they love with the last quarter of their life. It should be an exciting time, but when you hear that most Americans won’t be able to afford retirement, it can be worrisome. There are certain aspects that can’t be controlled, however there are a few things you can control to make sure you are ready and your retirement is enjoyable.
First and most obviously, make sure you are saving enough. Review your financial plan regularly and check your progress toward your goals. Knowing what you have, and what you need to set aside to invest is the first step in working towards a successful retirement.
Deciding when to stop working is the second thing you can have some control over. It could be a gradual retirement, working less hours or part time before you fully quit. A growing trend is the “second act”, where people are switching jobs to something they’ve always wanted to do. There are stories of people leaving high paying corporate jobs, with a decent size savings, and then choose to work at a non profit where they make less, but are much more fulfilled. Working a few more years, and waiting to tap your savings, can really make a difference in the income you receive in retirement.
Be aware of the timing on when to start receiving Social Security, Medicare, and any pension income. If you want to stop working at age 60, but aren’t able to get Medicare to 65, you need to make sure you can afford health insurance until you are covered. There are also many different options as to when you should collect Social Security. Each year you delay collecting Social Security benefits after your full retirement age, gives you an additional 8% in income. But sometimes taking the money earlier instead of tapping you’re retirement funds is the better option. Take some time with your advisor to plan and make sure you are optimizing your Social Security benefits.
The final piece of retirement planning is deciding when and how to give away savings above and beyond your needs. If you are planning to make charitable donations, it may make sense to start gifting appreciated stock, or use a charitable gift fund to help minimize your taxes. You should also review your estate plan and financial accounts to make sure what you want to happen after you pass away is what will happen. Review your beneficiary designations, make sure your spouse or children know how to access important documents, and do regular reviews with your advisor as to what your options are when it comes to legacy and estate planning.
If you take control of what you can, plan wisely, and have proper guidance, retirement should be the low stress, exciting time that you’ve dreamt it to be.
All comments and suggestions are welcome.
Marisa A. Bradbury, CFA®, CFP®