August 8, 2019
Are You Ready to Retire? 5 Important Things You Need to Know
For many individuals, retirement may be defined by anxiety and stress. But it doesn’t need to be with the right preparation and planning. Here are the five important things you need to know if you are ready to retire.
1. Your retirement age matters. A study from the Stanford Longevity Center found that an additional three months of work generated the same increase in retirement income as saving an additional 1% of earnings for 30 working years. This is why we encourage modern retirees to keep working if it’s the right fit for their goals and needs.
2. Social Security claiming age. The fact that optimizing your Social Security election will improve your retirement income plays into this becoming one of the most important retirement decisions that you will make. For example, an individual with a full retirement age of 66 will receive about 76% more by claiming at age 70 instead of age 62. When planning as a couple, it is also crucial to understand how each of your elections, when viewed as a whole, can help maximize the total lifetime benefit.
Since a fair amount of modern retirees will be receiving more than half of their retirement income from Social Security, optimizing your benefits and considering if deferring could fit into your retirement planning picture is critical.
3. Your expenses and spending matter. If you are able to reduce your expenses and spending in your later years, it’s no secret that your money will last longer. If you correctly plan for this, you may not have to abandon the lifestyle that you’ve become accustomed to. How much you can afford to take out and spend each year in retirement will depend upon a lot of different moving parts.
Modern retirees need to think about ways they can increase the types of regular income that will potentially last their lifetime, regardless of longevity. As mentioned above, deferring Social Security to age 66 or 70 is one way to increase your monthly income if that’s what you choose.
Another way is to purchase a fixed annuity to accomplish the same kind of goal.
4. Shift your mindset from saver to spender. After spending your whole life planning, saving and reaching this milestone of retirement, you have a lot to be proud of. But the job is not finished yet. Transitioning from this mindset of a saver to now being a spender often throws many people for a loop. This can be the biggest challenge from switching to withdrawals after all of those hard years of saving.
Focus on withdrawing money, on a monthly basis, for your basic living expenses. This will help calm your nerves and anxiety about pulling out a year’s worth of expenses on a potential day where the market closes lower than everyone anticipated.
5. You are still thinking about working in retirement. You most certainly can work in your retirement years, but will you? And, is it going to be part-time or will you still have a set amount of hours you’ll need to be productive? Today, many will choose to work in order to stay occupied and to keep their daily routines in check.
In fact, those individuals who work past the age of 65, or have other passions and dreams to pursue, are often the happiest people in retirement. Additionally, the extra money never hurt anyone’s financial health or wealth.
Whether you are volunteering at a non-profit, or spending time with friends, family or the grandkids, finding meaningful ways to fill your days will lead to a much happier retirement.
Ask yourself, what does your dream retirement, lifestyle, health, and wealth look like?