Navigating Your Transition to Retirement
The transition to retirement should be an exciting time, but it can often become overwhelming, especially in volatile markets. While it may be complicated, planning for this transition in life is extremely important. As people continue to live longer, our income in retirement has to cover those extra years.
So, when is the right time to get started? Now!
Starting your retirement planning early can have huge benefits. If you are already within 5 years of retirement, it’s not too late, but you’ll want time to make adjustments to your budget if necessary, reduce outstanding debts and determine your best option for health benefits.
No one wants to be one of the unfortunate retirement financial horror stories we’ve all heard about.
Retirement is a profound adjustment in one’s life and lifestyle, so it makes sense to get a jump on the emotional, financial and physical changes that accompany this new phase in life. The starting point is to draft an after-retirement budget in which you cut living expenses to match reduced income. Two-income households should see what it’s like to live on one salary.
You’ll also want to test drive your day-to-day plans. Even if your dreams are to just relax and enjoy your extra time, try it out! You may find that you have more time than you thought and get bored. Retirees who find themselves with nothing to do and no one to socialize with can suffer loneliness and even depression.
If you plan to move in retirement, experiencing your new locale first is also wise. If you plan to retire in the Carolinas but don’t currently live here, try visiting for a few weeks (longer if possible) to make sure it’s the right place for you. (Retirement planning in Greenville, SC is different than in other areas.) Include in your visit the neighborhood or community you anticipate living in. Investigate the local healthcare facilities, crime statistics and religious institutions. If you plan to eat out often, are there sufficient choices within any budget constraints? Also review support for your hobbies, whether angling, yachting or golf.
The more you can learn up-front, the fewer surprises you’ll have to contend with once you retire.
Here are a few other suggestions for trying on retirement before jumping in with both feet:
- Cut back on hours.
- Work part-time first.
- Take extended vacations, staycations or breaks from work to experience what life will really be like.
- Take on a new role at work, such as consulting, which gives more flexibility.
Addressing any issues you have with your retirement plans beforehand can help save you expensive moves or decisions.
According to the Social Security Association, about 90 percent of Americans age 65 or older receive monthly Social Security payments. Social Security comprises up to 34 percent of the average retiree’s income. Moreover, 71 percent of individuals and 48 percent of married couples count on Social Security benefits for at least half of their income. While it probably isn’t enough to live on, Social Security will likely be a significant part of your financial plan.
Deciding the right time to take your Social Security benefits is an important, but often complex, decision. Your plan should account for your total monthly income including the Social Security benefits for yourself and your spouse.
Obviously, your retirement plans will also come into play. You can start receiving penalty-free distributions from your IRA and 401(k) at age 59-½. But thanks to a recent change, you don’t have to start taking Required Minimum Distributions (RMDs) until age 72.
Make sure you also consider other income sources, such as reverse mortgages, investments, life settlements and rental properties.
The earlier you work out your financial plan for retirement, the easier it will be to take the steps necessary to meet your goals. Working with the right financial advisor is key.
Retirement brings many changes that can affect your mental well-being, for better or worse. Choose better! Retirement in the 21st century offers unlimited opportunities to engage your brain daily without a lot of travel or expense.
Social engagement is key. If you don’t have friends or family close by, make sure to engage via online or mobile platforms. Call, email, video chat – whatever you have to do to stay in touch.
Make a plan for how you will fill your days in retirement. Is it work on your home or yard? Retirement may give you the time to finally spruce up you house, plant a garden, put in a putting green or organize your garage. There are dozens of DIY projects that can make your home more cozy, functional and fun.
Picking up new skills or taking a hobby to the next level can also be rewarding activities. You may now have the time to address all those interesting things you’ve always wanted to know more about. There are thousands of free online courses available from the country’s best universities, local community colleges and national e-learning companies. Learn a foreign language, explore the art of the 19th century, or master the art of the souffle.
Some people retire at 60, while others wait until they’re 75 or older. When to retire is a good question and a very personal one. For example, if you haven’t saved enough for a comfortable retirement, you might choose to work longer and increase your savings. If that’s the case, the right age for you to retire may be older than you expected. Talk to a financial advisor about your options.
You may be able to rework your situation by reducing your cost of living. Downsizing or relocating can significantly lower your cash outflows. You can also sell off assets you no longer need, like a second home, a boat or an RV. As folks are living longer, it’s important to take steps to ensure you don’t outlive your money, no matter what your age.
It’s natural to consider relocating for retirement, and many decide to do so for emotional reasons. But financially, moving at retirement can be a big risk. While you may have worked hard all your life and saved up a retirement nest egg that could finance a move to another location, it can be more costly than you initially thought. The right kind of move could be a financial plus, but it can also drain your savings and shortchange your future.
If you move to downsize, your monthly budget could benefit. Keep in mind that downsizing can have emotional costs, especially for new retirees who aren’t accustomed to spending a lot of time with a spouse or other family members. Giving up space might also interfere with your hobbies. But, if after serious consideration, you decide to downsize, do so with caution – the financial benefits might be smaller than you imagine.
In retirement, you need income for life, so why not use some of your time to generate extra money? You don’t have to go back to work to increase your income. But extra income will certainly help make your investments last.
Discuss your options with a financial advisor. Pay off your debt. Establish a savings account that can help bridge the gap if you have expensive medical needs, home repairs or an emergency you weren’t prepared for.
Global View Investment Advisors LLC is a fee-only, fiduciary financial advisory firm headquartered in Greenville, South Carolina and serving investors nationwide. Our mission is to provide truly independent, conflict-free advice and complete wealth management services, so you can protect and maximize the wealth you’ve built.
If you have questions about your retirement plans, contact us to see how we can help. Successful retirement investment stories start with a financial advisor you can trust!