Planning for Retirement: Are You Ready?
This article is the first of a three-part series on planning for retirement. The focus of this article is preparing yourself. Follow up articles will cover maximizing the value of your retirement assets and estate planning.
Are You Ready . . . Emotionally?
In our culture it’s not uncommon to ask someone, “So what do you do?” We take pride in our careers and in many ways allow our careers to define us. This makes sense because we’ve probably spent more than half of our lives working. We’ve spent the last 30 to 40 years waking up with somewhere to go, a deadline to make and a meeting to prepare for. It might have been frustrating at the time, but it will be missed.
What will give you that sense of purpose? It may be caring for grandchildren or parents, dedicating more time to volunteer work, or working part time. Looking into contract or consulting work with your current employer can also give you more control over your hours, allowing you to “ease into” retirement.
Have you had a conversation with your spouse? This can go two ways; they may not yet be ready to retire, or they can’t imagine you being around all the time.
Are You Ready . . . Financially?
We often meet with clients that are in the “Retirement Red Zone”: kids have moved out of the house, 5 to 15 years away from wanting to retire, and are entering a phase in their life with maximum income, saving and investing opportunities. As advisors we are often asked, “Do I have enough to retire?” It is usually answered in one of three ways: “You’re well on your way, keep up the great work”, “You’re close to achieving your goals but we need to make some adjustments”, and sometimes, “Congratulations, you’ve won the retirement game, when would you like to start?”
Answering the question requires a rough idea of your living expenses and what you expect your lifestyle will be. When planning for expenses, be sure to consider:
- Family expenses – Will you need to assist a parent or child in need, or would you like to assist with your grandchildren’s education?
- Health costs – Have you considered the cost of private insurance (if you are younger than 65), Medicare, and non-covered medical expenses?
- Home maintenance – Do you have a reserve for a new roof, furnace, or to cut down that tree?
- Periodic expenditures – Are you reserving money for a new car or big vacation?
Being prepared financially for retirement is more than just having the assets, it’s developing a plan for spending and meeting unexpected expenses. Perhaps even more important is being prepared mentally and emotionally so that retirement is something you’re running to, not something you are running from.
If you would like to have a conversation about planning for retirement, please call your JMG advisor.
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