The Big Picture of Retirement

Many people hope to retire early and dream of leisurely days and evenings filled with fun, food, and family.  For other people retirement feels like it’s being thrust upon them unexpectedly.  At the same time the media touts that Americans have the ability to work longer in their careers and should do so. Conflicting messages and the proverbial “shoulda-coulda-woulda” thoughts that emerge when the topic of retirement surfaces can create fear, doubt, and confusion. So let’s set the record straight…working until age 80 or retiring into your dream life at age 50 are two extremes that rarely happen.  Instead, most people find solid middle ground in which they can enjoy retirement and honestly plan for an appropriate retirement age given their unique situation. Statistics are demonstrating that people are working longer, but only by two years, meaning women are now working until age 62 and men are remaining in the workforce until age 64. This suggests that rather than set your sights on the extremes, planning should be focused toward a more typical scenario. What can you do to prepare for your upcoming retirement? Here are some tips that can help you assess your retirement viability, no matter what age you leave the workforce.  

1.    Assess Your Savings and Emergency Funds
Men and women tend to save differently. Women tend to save less for retirement, mostly due to earning less in their lifetime than most men. Couples who work together on their finances generally have a better nest egg of savings and emergency funds. Fidelity recommends that people begin saving 15% of their annual salary from the start of their careers in order to retire by age 67. Unfortunately, few people have followed that recommendation. Instead, most people save more rigorously after the kids are out of the house, saving closer to 30% of income during final 10-15 years of their careers. Of course, procrastinating increases the risk of not having enough money to support retirement needs. The bottom line is this: take an honest look at your saving habits now and consider how you can improve these habits to ensure better retirement viability in the future. 

2.    Think About Your Goals in Comparison to Your Spending Habits
The Baby Boomer generation has been characterized as the largest spending generation in the history of America. This was generally caused by a cultural belief that money could be made easily, so money spent now could be made up later in life. Unfortunately, the upward momentum of our economy was struck down by the Great Recession, causing many people in their 50's to re-evaluate spending habits.  Before cutting your expenses, it’s important to consider your retirement goals.  It’s typically a good idea to consider these goals in dollars and cents rather than in general terms, such as, “I want to maintain my lifestyle into retirement.” All successful plans have an end-goal in mind.  Determine your end-goal and then talk with a Certified Financial Planner® in order to better understand how to modify your spending habits in order to reach your goals. 

3.    Consider the implications of your retirement on Social Security benefits
Most people think about Social Security in terms of bottom line monthly income. However, social security strategies should be assessed in order to determine the long-term implications of whether one begins drawing Social Security before full retirement age, at full retirement age, or at age 70. Many Americans begin receiving Social Security benefits prior to full retirement age, and this means they’re potentially missing out on tens of thousands of dollars over their lifetime (potentially 25%-30% of the lifetime Social Security benefit). Be sure that you understand how your Social Security choices will impact your lifestyle during retirement.

4.    Re-evaluate Your Insurance Needs
Insurance is meant to protect individuals during specific seasons of life. It is not meant as an inheritance vehicle.  Insurance needs during peak income-producing years may be very different from insurance needs in retirement. For example, let’s consider Joe.  He is the primary bread-winner in his family and has two children. Years ago, Joe bought a million-dollar life insurance policy to ensure his children had the resources needed to attend college if he came to an unexpected death. Today, Joe is 68 years old.  This policy on which he continues to pay premiums may be overkill now that his children are past college and living independently. However, disability and long-term care insurance may become more important during Joe’s later years. Prior to meeting with an insurance agent, connect with your FEE-ONLY Financial Planner to determine which products are most appropriate for your goals.  This will arm you with the knowledge you need to purchase only the products that are most beneficial to you and your overall retirement plan. 

5.    Review Your Investment Portfolio
An investment strategy is typically designed around a primary goal and risk tolerance. As individuals and couples approach retirement, investment portfolios become a more dynamic and critical component to financial success. As retirement creates gaps in income, the investment portfolio can be adjusted to fill that gap by increasing the amount of income-producing securities.  As age limits the ability to recover from significant economic downturns, investments can be shifted from a growth orientation to a more defensive approach. Developing an estate and wealth transfer plan will also potentially modify investment approaches.  Talk with a financial advisor prior to retirement in order to develop a comprehensive investment strategy that will meet your changing needs.

6.    Plan for Your New Lifestyle
Retirement planning goes beyond financial considerations.  Accomplished people who retire without a holistic plan may find themselves at a loss for how to spend their days.  Before retirement, decide on the activities, hobbies, and social events that will create a consistently active lifestyle.  This is important to ensure that financial assets are available to enjoy these activities and it has been proven to increase happiness in newly retired individuals.  Boredom or a loss-of-purpose can be detrimental components to experiencing a successful, joyful retirement. Select social engagements and groups that keep you active and participating in life in significant ways. This will keep doldrums at bay.

1. Center for Retirement Research, Boston College. .
2. Fidelity Investments. 
3. Kiplinger’s Retirement Planning 2017 Magazine. Summer Edition. Ready, Set, Retire, by Jane Bennett Clark, pg. 9.

*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.