A Motley Fool article offers the warning “Don’t Retire Unless You Can Answer These 4 Questions” and the questions they outline are good ones. Many of us dream of the day when we can retire but a number of us do not actually plan well for the reality. In the best case scenario, we reach retirement and realize that we have not planned well for our financial or emotional wellbeing and then we quickly make adjustments. In the worst cases, we are forced into retirement earlier than we might have imagined and find ourselves at a loss.
Measuring income: As you examine what you will have to live on in retirement, you can do more than just look at income sources (Social Security, retirement savings, pension); you can do some calculations: “Figuring out your income from retirement savings is a bit trickier, but you can start by assuming you can withdraw at least 3.5% of the total balance each year. Just multiply the total balance in your retirement savings accounts by 0.035 to determine your minimum annual income after you retire…”
If that number makes you panic, call a Fee-Only Financial Planner to start working on how you can change that figure into something that makes you feel more comfortable.
Managing investments: The Motley Fool advises that your investment goals change once you retire. As a younger person, you are interested in accumulation—investing in ways that will earn you as much as possible as fast as is prudent. As a retired person, you will be more interested in preservation—having the pool of money that will last and allow you to keep drawing income from it. It is important to work with a financial advisor who understands this.
Managing healthcare expenses: Having your own retirement savings can make a big difference because as the article notes, “….healthcare expenses are going up faster than overall inflation, don’t expect your Social Security cost-of-living adjustments to keep up with those expenses.”
Talk to a financial planner about long-term care insurance before you need it since long-term care can become burden for some retirees.