How to Plan Ahead for an Exceptional Retirement
Raise your hand if you’re feeling worried about retirement.
The truth is, some people are intimidated by the concept of retiring. You’ve spent a lifetime building a career, and retirement may feel like you’re going from 100 MPH to 0 MPH overnight. To add to the stress, there are several financial logistics that you have to deal with in retirement that can be confusing:
- Getting your money out of savings and turning it into a consistent income
- Understanding your cash flow, and using it wisely
- Taking taxes into account, and mitigating their impact on your retirement income
Just to name a few.
However, we’ve found that when you plan ahead for both the financial and the lifestyle aspects of retirement, you’re able to retire with more confidence. Let’s break down how, exactly, you can start to plan ahead for retirement now so that when it comes time to leave your career behind, you can do so with peace of mind.
Know The Numbers
Do you currently have a budget in place? For many people, having a clear-cut budget that’s based on their available cash flow helps them to make wise spending and saving decisions throughout their life. So, why wouldn’t we apply that same concept to your retirement finances?
Having a budget going into retirement can help you to stay organized, and can give you a better sense of how much money you actually need to save in order to live comfortably as a retiree. Creating a retirement budget doesn’t have to be complicated. Start by estimating your expenses. Write them down if it’s easier! Then, estimate your expected retirement income that’s coming from your pension, Social Security, and savings.
When you subtract your total expenses from your expected income – what’s left over? Do you have comfortable wiggle room in your budget for big-picture goals like traveling or spoiling your grandkids? Or could you use to cut back some expenses to pursue the things that truly matter to you? Knowing the numbers ahead of time can help you to make smart decisions about some of your expenses going into retirement – like whether or not you need to downsize your home, or if you should take a closer look at how you plan to pay for insurance throughout retirement.
Think About Your Lifestyle
After you look at your retirement finances, it’s time to hold the magnifying glass up to your lifestyle. People often view retirement as big moments. Maybe you’ve always planned to take your whole family on a beach vacation after you retire, or you want to buy a boat and spend a summer on the ocean. Whatever your “big moment” plans are – keep in mind that they’re only a small portion of your retirement.
Some retirees could spend 30+ years in retirement. That’s a huge portion of your life! Planning for one big trip, or one big moment isn’t going to help you when you wake up on a Tuesday morning and are unsure how to fill your time. This is where having a lifestyle plan in place can be a huge help.
Take some time to imagine what you want your day-to-day to look like in retirement. Where will you find purpose? How will you connect with loved ones after you retire? We’ve seen some pretty incredible retirement lifestyle plans – and the beauty of this exercise is that you get to create something that’s completely tailored to you and what you’re passionate about. If you’re feeling stuck, it can be helpful to start by brainstorming your values. For example, you might value:
- Time spent outdoors
When you’re working to plan your lifestyle around these values, you might come up with the following ideas:
- You call your kids and offer to pick your grandkids up from school every Friday and spend time with them while your kid and their spouse enjoy a date night away from the responsibilities of parenthood.
- You decide that you want to host a monthly potluck-style dinner with all of your kids, grandkids, siblings, and family friends at your house.
- You research what starting a vegetable garden in your yard would look like – and how you can keep it going year-round.
- You purchase an annual pass to local national and state parks so that you can spend time hiking and enjoying nature.
- You plan to join a local art or writing class to exercise your creative skills during retirement.
- You start a book club with some of your closest friends.
- You research how you can get involved with community volunteer work.
- You ask the leadership at your church or religious organization how you can support them – possibly by volunteering a few times a week to take care of admin work, help with the on-site daycare, or lead a committee.
Talk to Your Spouse or Partner
Keep in mind that you’re not in this alone! If you’re struggling to come up with lifestyle ideas or planning out your retirement finances feels overwhelming, talk to your spouse or partner. You may be surprised by some of their goals and dreams – and together, the two of you can put together a plan that makes you both happy.
“Test Drive” Retirement First
Remember: hope is not a strategy. Part of planning ahead is making sure that you have a proof of concept before moving forward with any given retirement strategy. For you, this means “test driving” both the financial and the lifestyle plans you’ve put in place for yourself and your family. Luckily, test driving your retirement budget is relatively straightforward.
Spend a few months before you begin retirement living within the total retirement income you expect to receive each month from Social Security, your pension, and distributions from your savings. Does the budget you created make sense? Or do you find that you’re over or underspending in some categories? Now is an excellent time to reevaluate your planned retirement budget, because you have a better idea of what works and what doesn’t.
It’s also useful to test drive your lifestyle plans ahead of time. This is especially important if you’re planning on making a dramatic change – like moving south for the warmer weather. Using this example, you might take an extended vacation pre-retirement to the area you’re planning on relocating to. Is it enjoyable to live there full time? Will you want to do this long-term, or would planning an annual vacation during the winter months make more sense?
If you need help putting together a financial and lifestyle plan for your retirement, or working through a “testing period” before you retire – contact us. As financial planners who specialize in working with pre-retirees, and people who have already taken the leap to retirement, we can help you to plan ahead for any potential challenges you may face.