Research shows that people who have more specific ideas of how they want to spend the retirement part of their life, end up being more satisfied than those who just wing it. We think that’s because those who create a plan have also devoted some time and energy to considering what retirement means to them, what issues they may face and what is meaningful to them.
Forbes recent article, “5 Key Retirement Questions You Need To Answer When You’re 50 Or Older,” boils it all down to a few key ideas.
How long will retirement last? Your plan will be vastly different, if your life expectancy is 10 years than if it is 30 years. Most folks underestimate average life expectancy, and that can result in financial distress in the later years of retirement. Check online sources to determine the average life expectancy for your age group, and talk to your doctor.
When will you be ready to retire? This answer frequently determines how satisfied you’ll be in retirement. Remember that your age shouldn’t determine your retirement date. It’s retirement readiness that counts.
What are you going to do in retirement? This also includes how you think you’ll spend your financial resources. Create a personalized spending estimate, based on your interests, planned activities, and forecasted unexpected repairs or life events of family members you may want to contribute to financially. Decide the lifestyle you want in retirement and estimate the current costs. Most people spend less as they age because they’re less active. However, it might increase later in life because of medical and long-term care expenses. Add inflation into your estimates because most of what you’ll spend money on in retirement will go up in price over time.
When will you be able to retire? Being able to retire means your income and assets are enough to let you maintain your desired standard of living. Unfortunately, the retirement date isn’t always in your control, so add in a contingency that you might retire before you want due to health or layoffs.
It is difficult to estimate medical expenses and long-term care in retirement. Many new retirees underestimate these costs and overestimate what Medicare and other government programs will pay. It’s wise to maximize insurance coverage. Sign up for a Medicare Advantage plan or join traditional Medicare and add a Medicare supplement (Medigap) plan and Part D prescription coverage. Your fixed monthly expenses will be more with the insurance premiums, but your potential maximum out-of-pocket expenses will be less. Additionally, make sure you have emergency funds for unforeseen medical issues.
How realistic are your plans regarding managing and spending down your nest egg? The most common mistake retirees make is overspending in the early part of their retirement, which often leads to needing to make major adjustments (or moving in with the kids) later in life. Have an investment strategy that can be modified as circumstances, like health care costs and market swings, require. Be flexible—what works when you are 70, may need to be revised when you are 78. Retirement finances are never “set-it-and-forget-it” plans.
In addition to having your funds and plans prepared for retirement, you need to have your estate plan sorted out as well. Since you do not know how long you will be retired for because of life expectancy, it is better to get your estate plan in place early. This will ensure your heirs or spouse are not left scrambling in the event of your passing.
For more information on planning your estate and making sure you are retiring sustainably, visit our website and schedule your consultation today!
Reference: Forbes (April 3, 2018) “5 Key Retirement Questions You Need To Answer When You’re 50 Or Older”