Retirement is what you make it. That said, the magnitude of planning for retirement is often underestimated. It requires you to reevaluate and adjust your outlook on life–both positively and sometimes negatively. Throughout my career as a financial advisor, I have helped thousands of clients transition from working into some form of retirement. Here are three thoughts on how I counsel clients to structure their best retirement.
What Is Your Best Day in Retirement?
Retirement is the time to do what makes YOU happy. When you’ve been working for decades, it’s hard to imagine the amount of newfound freedom that comes with retirement. Moreover, the change in your daily routine can leave you feeling lost. I have helped clients of all financial means prepare for retirement; however, too often I have seen individuals retire without a real plan for their long-term engagement with family, friends, and their community. This means potentially missing out on the best part of your golden years.
Consider how you would answer the following questions:
- What will bring me the most fulfillment in retirement?
- Where do I want to spend time? Is that different from where I live today?
- How will I stay engaged with my community?
Those three questions will give you a starting point to outline the activities you want to pursue most once you retire. Will you build your days around helping younger generations in your family? Will you start traveling or snowbirding (traveling to warmer weather for winter)? Be sure to consider these options and create a plan for what will make you happy.
Address Your Budget
Another vital aspect of retirement is recognizing the importance of living within your income sources. You may have a significant investment portfolio or pension income; however, many of my clients spend 30 years in retirement, and making sure your funds will last the duration of your retirement is critical. When creating a retirement plan for pre-retiree clients, I always stress the importance of monthly budgeting. Many retirees find that once they leave the workforce, they have more time to fill, leading to more social activities and traveling–essentially, more opportunities to spend money.
Do you know how much you earn monthly vs. how much you spend? This is a simplified way to think about budgeting. Building a spending plan doesn’t mean you have to allocate your spending to every dollar–instead, you must be aware of the trade-offs involved in living your best retirement within appropriate spending levels. Some of my most satisfied clients often have low-cost hobbies such as gardening, fishing, or golf (but golf can be expensive, too!). Additionally, volunteering is often a great way for retirees to stay engaged with society, feel valued, and positively impact those in need.
Consider Your Shortfall
Okay, time for the tough one: Your shortfall is the number one factor in determining if you can retire at your intended time. Will you have enough income once you stop working to maintain your lifestyle, enabling you to transition into retirement?
We all know that you will receive Social Security, Medicare, and a pension in retirement. Most of my clients do not receive a pension and will make up that income source with withdrawals from their investment savings. Determining the amount you will need to withdraw from your savings will be based on the difference between your income sources and how much you will spend on your lifestyle. This amount is known as your retirement income shortfall.
Determining your retirement income situation is crucial to my work as a financial planner. I help clients understand their situation today, in year 1 of retirement, and forecast their situation 10, 20, or 30 years into the future. My goal is to educate clients on how they can make the best decision for their goals and life objectives; in some cases, clients retire and start a consulting company; other times, they choose to work another year or two. It comes down to determining options that best fit how they want to live their lives to meet their retirement goals.
There are many investing strategies to consider upon retiring. The most successful approach I have implemented in my career has been to tilt a client’s investment portfolio to income-producing securities, such as dividend-paying stocks, bonds, and real estate investments. My clients find that we successfully create a retirement paycheck that will achieve their lifestyle goals through implementing our investing strategies and carefully monitoring their financial plans.
In conclusion, planning for retirement can be scary in many ways: First, you only get one attempt to have a great retirement,. You also completely change your life vs. your working years, and you must develop new ways of fulfillment. No matter your goals for retirement, it’s critical that you have a great financial advisor that will communicate with you consistently and maintain a well-thought-out life plan that is aligned with your goals.
For over 15 years, I have helped individuals prepare for retirement. As a CFP, I work as a Fiduciary to put your interests first and give you unbiased advice based on your personal and financial goals. If you are interested in partnering with me, you can contact me directly at (859) 203-1414 or Chris@EnryPointWM.com. If you explore additional options, I recommend you find a Fiduciary CFP and start building a plan to make your golden years shine.