We spend a lot of time helping people get ready for retirement. We find the same issues come up over and over. Some of them can spell the difference between a successful retirement with enough money and some will cause you to make decisions you might not want to make.
Understand social security.
The goal with social security is not to get the most you can from the government. The goal is to have the most money when you finally decide to stop working.
If you retire at 55 or 60, you might want to start taking social security as early as you can. On the other hand, if you’re like me and plan to work past 70 there is no reason to take social security till then. You can have a very nice bump in your benefits every year you postpone taking social security benefits. That bump is often a better deal for you than starting early and taking the most money you can.
Are you going to work in retirement?
Your retirement might not be retirement. It could be about doing something different. For you this might mean you do some sort of work for money. If this is part of your plan, then factor working it into your plans. Hopefully if you decide to work it’s because you want to and not because you have to. That’s where regular savings comes in.
What happens if you get really sick?
The best of plans can go by the wayside if you get really sick. You need to at least think about what will happen to your life if you get an illness that makes you incapacitated but doesn’t kill you. There’s a good chance that during the worst of your illness you’re going to have extra expenses and no income. What do you plan to do if this happens?
Where do you plan to live?
I recently had a phone call with a client who moved to a less expensive state to live. His business didn’t do as well as he planned. He ended up selling earlier and for less money than he always thought he would. He solved the problem by moving to a state that cost him much less money. He’s happy and likes where he’s living. He got in front of the problem and as a result it caused him some inconvenience but so much that he had to seriously change his lifestyle.
You’re going to feel funny.
Not going to work every day will take some adjusting. You might feel lonely. You might feel that no one likes you. Your phone is likely going to ring much less. People you spent tons of time with just will fall off the map. This is a tough thing to understand. It happens enough that we always spend a lot of time in our financial planning engagements talking about it. Be prepared……and then you’ll still not be prepared.
Timing could make or break you.
If the market melts down the first few years you’re retired and you’re spending your nest egg, you could have much less money than you planned. We believe that stress testing your plan by having the first couple of years of retirement lose money is only good planning.
Do a financial plan.
Speaking of stress testing make sure you do a financial plan. As part of the planning process, you’ll do scenario tests that show your portfolio losing money. You might decide to postpone retirement or you might decide to change your retirement goals. Either way, it’s testing your plan on a regular basis that’s important.
Doing a financial plan is not the beginning and end of what you need to do. Every few years you’re going to need to dust off the plan and go through the stress tests all over again. The thing you don’t want is to get to retirement and find out your assumptions never came true. That is unless you just likely potentially nasty surprises.
We’ve got a special report on transitioning into retirement. This report covers the seven items in this blog post plus much, much more. If retirement is on the horizon for you I hope you download this report.