Deciding when to retire is different for everyone. Some people choose to retire so they can travel, help take care of grandchildren, pursue other interests, and/or all of these and other pursuits. For others, the decision may be driven by employer’s mandatory retirement directives, personal health issues, or simply “you’re just tired of working” considerations. Regardless of the reason you’re considering retirement, there are several things to think about before you do.
Can You Afford To Retire?
This is probably the single biggest issue facing most retirees. But the answer is different for everyone. First, take into account your projected income after you stop working…income from Social Security, investment income, pensions, retirement account distributions, and other sources. Second, calculate your current monthly expenses and make adjustments for post-retirement costs. For example, do you plan to travel? How much do you project to spend each year? What about cost reductions for things like life insurance you don’t need any more? Or housing costs? Do you need or want to stay in your current home? If there’s substantial equity, do you need this to finance your retirement or is this extra capital available to pursue your life’s passions? And depending on your situation, can you reduce overhead by relocating to another State? What about contributions you may wish to make to a grandchild’s college education? These decisions should not be made without careful consideration and a clear vision of how you want to spend your retirement years.
Take Care Of Big Expenses Before You Retire.
If your home needs major repairs, or you anticipate other significant expenditures, handling these expenses is typically less impactful when you still have employment income. Additionally, if you need to finance any major expense, you’ll have more financial options available while employed. Equally important, setting yourself up to live on a fixed income, reduces the chance you’ll need to tap into your retirement assets, potentially diminishing the quality of life, post retirement.
Is Your Investment Portfolio Set-Up For Retirement?
One guiding principle of retirement investing is to diversify your portfolio to hedge against market volatility, protecting capital, and providing for monthly income based on your individual situation. It’s important to understand that for most retirees, avoiding more risky investments like junk bonds, most start-up ventures, and non-liquid investments is the way to go. But even with these limitations, there are so many “solid” investment opportunities available, planning in advance to maximize monthly income, minimize income taxes, and preserve capital to last the rest of your life…most people can achieve their retirement goals. Consider too that smart financial planning might include applying for a home equity line of credit or securing a reverse mortgage might provide access to cash in the event you experience some unforeseen emergency.
What Do You Know About Your Social Security, Medicare & Other Health Insurance Options?
Basic social security income will be based on your income and social security taxes you paid during your working life. But there are variations based when you decide to take social security distributions, your health, your spouse’s social security, and other factors. The same is true for Medicare. You must register by age 65 to avoid significant penalties. But you have options about supplemental coverage that don’t require you make any commitments when you first sign-up. But it is important to know your options and make smart decisions for your individual situation at the outset.Many of these decisions may be irreversible.
Do You Know What You Want To Do In Retirement?
We alluded to this at the beginning of this article…planning for expenses related to the things you want to do in retirement. But it’s worth reiterating that none of us know how long our health will hold out. So making plans to pursue your passions is really important for all retirees. Do you like golf, fishing, playing cards, travel, pottery, visiting wineries….? Make a plan so that you’re not idle in retirement and you make the most of your retirement years. After all, you worked hard to get here and you deserve to live it up!
When You’re Ready To Retire, We’re The Ones To Hire.
At Village Wealth Advisors, we help clients develop a plan for living followed by a plan to fund it. From financial planning to investment management, during stable or unstable markets….our expertise will help you live worry free.
"All opinions and estimates constitute Village Wealth Advisors’ judgment as of the date of this communication and are subject to change without notice. Village Wealth Advisors does not warrant that the information will be free from error. The information should not be relied upon for purposes of transacting securities or other investments."