Teresa Arrigo | Financial Advisor

written by:

Teresa Arrigo
Financial Advisor

It's hard to know the right time to retire.

The fact of the matter is there is no do-over in retirement, and sometimes that makes it difficult for a person to say with confidence, “I’m ready!”.

I’m a person who likes lists – I like the gratifying feeling of marking completed items off the to-do list. Lists generally help me feel neat, organized, and on track. If I go into the grocery store without a list, it turns out well for the grocery store but bad for my purse strings, not to mention most of the ingredients needed for dinner didn’t make their way into the shopping bags.

Lists can also help take the emotion out of decision making when you look at the facts surrounding important decisions. A retirement checklist works this way, too, with the idea being that you can say with assurance you are ready to take the leap into retirement.

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WHAT AND WHERE?

Items to include at the top of a retirement checklist are questions surrounding the “what” and “where” of retirement. Retirement should be about fulfilling hopes and dreams which is why it is critically important to think through what you want to do in retirement and where it is you want to do it. The amount of money you have matters less than feeling excited and fulfilled each day in your Life 2.0.

At GenWealth, we talk about this in terms of developing your passion and purpose in retirement. With life expectancy rising, there is a good chance many of us will spend 20-30 years in retirement. That means we’ll spend more time in retirement than we did raising a family! What are we going to do with those 2,000+ hours we spent at work each year? It’s better to think about these things now than after you’re emotionally and financially committed to a certain path.

 

To answer the “what” and the “where”, brainstorm on these questions. It’s important to consider all your ideas. Don’t shoot down thoughts with practicality bullets here. Just have fun dreaming of what could be.

 

  • What dreams have you set aside because of responsibilities?
  • Where do you want to live in retirement?
  • What new learning or experiences do you want to gain?
  • Where do you want to volunteer your time or resources?
  • Where do you want to travel?

 

WHEN?

Once you have a good grasp on what compels you and where, it’s time to choose your “when”. This is a question that you’ll need someone with experience to help you answer since “when” is threaded with “how much”. A financial advisor can help you develop a uniquely written, financial plan to support the dreams you have for your retirement.

HOW MUCH?

A trusted advisor can help you look at your current budget to determine “how much” and make any needed adjustments, consider account consolidations, calculate expected Social Security benefits, examine rules affecting pensions and 401(k) plans, decide on savings withdraw rates adjusting for inflation, and perform a gap analysis to find out if there is a gap that needs filling between your income and your expenses.

Should you find yourself in a position of having more dreams than income, there are options for filling the gap, but it really all boils down to two things – either increase your income or decrease your expenses.

Options for increasing your retirement income can include:

  • Delaying retirement – Every additional year you work is a year you add to savings instead of taking away from it.
  • Phased retirement – Maybe you work longer, or work a part-time job. You might think 30 years in retirement sounds too long to not work.
  • Savings Withdrawal rate – Perhaps you look at adjusting spend down rates. An average is just an average after all. It isn’t a one size fits all.
  • Convert other assets to savings – Selling seldom used assets is a way to boost savings as well.
  • Convert home equity to savings – Downsize and use the equity from the sale of your home as additional savings.

On the flip side of the equation is expenses. By reducing expenses, you have less need to boost savings. And sometimes it’s easier to find a way to cut $1,000 from your monthly budget than to figure a way to save another $300,000 for retirement. ($1,000 * 12 = $12,000 per year. While $300,000/$12,000 per year = 25 years in retirement).

So, where should you look at cutting that kind of money from your budget? Here are a few ideas to get you started. Downsize your home, pay off the mortgage, revisit your insurance needs, become debt free, spend less on vacations or go on fewer vacations, and cut the financial cord on capable adult children.

WHAT ELSE?

When you’ve answered your questions of “what”, “where”, “when”, and “how much”, it is time to consider “what else”. There are things you can put into place now to make a big difference for your loved ones later. These are things like estate planning, organizing important documents, and putting long-term care insurance in place if needed.

Your final working years provide a unique opportunity to prepare. Deciding on your strategy now can make a big difference in what I hope will be a long and fortunate retirement for you.

If you are nearing retirement and don’t have a gap analysis of your own, we can help!  Click here to get in touch with one of our financial advisors.

5 Questions To ask yourself before retiring

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.