Is retirement on the horizon for you in the next five to ten years? It’s a goal that you’ve spent a lifetime working towards, and with the finish line in sight, it's the perfect moment to fine-tune your plans to ensure your transition is as smooth as possible.
As you approach your target retirement date, it’s important to be intentional with your planning. Preventing missteps can help you avoid setbacks that could cost you money or force you to delay your retirement. In terms of financial planning, this is a pivotal time to stay attentive, reflective, and aware.
Consider these five key questions to guide you in the five years leading up to your retirement:
1. Are my retirement savings and financial situation on track?
Retirement planning isn’t a one-and-done task. There are many factors that can affect not just your retirement savings but also your family situation upon entering retirement. In the years since you began building your nest egg, you may have gotten married, divorced, and remarried, your kids may be out of college and starting their own families, or you could have a child who is still financially dependent on you. And then there are economic events that impact your retirement plan—both the personal ones, like job changes and promotions, and the global ones, like the pandemic and inflation. All of these things factor into when and how well you’ll be able to retire.
As you approach retirement, it’s important to reassess your financial situation and retirement savings. Consider whether you need to make adjustments in your lifestyle in order to bolster your savings while you’re still drawing a full-time salary. Or, you may decide you need to work an extra year or two. Of course, the opposite may be true—you may find that you’ve done well enough saving and planning that you can retire a bit earlier than expected. Either way, taking inventory of your current situation and adjusting your plan as necessary is important for crossing the finish line.
2. How can I align my spending habits with my retirement budget?
When you’re young and thinking far into the future, you may assume you’ll be ready to slow down and that cutting back on spending will be easy. How much could it cost to sit on your front porch sipping lemonade or meet friends for BINGO? But as the golden years draw near, you realize that your personality, interests, and preferred activities aren’t suddenly replaced by the caricature of a retiree you imagined.
With retirement getting closer, it’s smart to be more intentional about making adjustments to your lifestyle and adapting your spending habits. What are your non-negotiables, and what are you willing to give up? Will you need to make big changes, such as downsizing your home, selling a second home, or eliminating your annual vacation?
The earlier you shift your spending, the better. It not only allows you to save more toward your retirement but also eases the adjustment later. Start by canceling subscriptions, cooking at home more often, and eliminating impulse buys by sticking to shopping lists. You might be surprised by how little you miss and how much you save.
3. What are my healthcare options in retirement, including Medicare and supplemental insurance?
One of the biggest financial challenges of retirement planning for many Americans is the cost of healthcare. You might say it’s the price we pay for top-notch medical care, but there’s no denying that costs can feel excessive, even if you’ve built above-average wealth. Your nest egg could be vulnerable to medical expenses you hadn’t anticipated.
But while healthcare costs can be exorbitant, they don’t have to take you by surprise. The reality is that we are all susceptible to illness or other health challenges, especially in our later years, so planning for the financial impacts just makes good sense. In addition to taking good care of yourself, the best thing you can do to protect against big medical bills is to take time to fully understand your post-retirement healthcare options.
Learning about Medicare and supplemental insurance might not be your idea of a good time, but it’s necessary. Keep a close watch on the ins and outs of your employer-sponsored benefits and insurance options. Make sure you know what will be available to you after you retire and what the cost may be. The more you know, the better decisions you can make — for cost savings and for your health.
4. How will I spend my time during retirement?
People tend to be so focused on the numbers that they fail to consider what retirement will actually look like. Perhaps all you’ve considered is what you won’t be doing. No more commuting to the office, countless meetings, high-pressure presentations, or checking email on vacation. But what will you be doing instead?
Whether you love your job or can’t wait to call it quits, you should be aware that many retirees admit to missing some of the excitement, comradery, routine, and sense of purpose they achieve from their careers. Sitting around with nothing to do and nowhere to go might sound appealing now, but it gets old fast, and it also ages you faster. How you spend your time matters to your physical, mental, emotional, and spiritual well-being.
Start planning how you will spend your time well in advance. What will keep you mentally stimulated? What will help you feel fulfilled? How will you move your body and get fresh air and sunshine? How will you avoid loneliness?
You may choose to prioritize volunteering or getting involved in the community, travel experiences, entertaining at home, spending time with family and friends, or learning and doing things you never had time for, like picking up a new language or writing a book. As long as you stay active and engaged with life’s possibilities, there’s no right or wrong answer.
5. How will I transition out of my current career? Should I consider working part-time during retirement?
You might remember a time when retiring meant a gold watch and a company party. One day, Grandpa was an accountant, and the next day, he was fishing. These days, the ending isn’t always as abrupt or ceremonious. You may gradually transition out of a career, taking on part-time work in your field, sporadic contract roles, or consulting or coaching opportunities.
If you’re a corporate executive, this might mean stepping down from boards or taking fewer speaking engagements. In a profession like law or consulting, it could mean cutting back on your billable hours or taking lower-profile cases. A physician may transition to teaching and advising, and a professor may move to an emeritus role without teaching responsibilities. And an entrepreneur may sell off portions of their business over time.
Another common scenario is that after an unexpected layoff, individuals may adjust their plans and decide to retire early rather than look for a new job. And sometimes, that decision is made for them by an unfavorable job market.
You Deserve Answers
With retirement on the horizon, it's time for purposeful planning. Take inventory of your current financial situation, adjust spending, explore healthcare options, envision post-career pursuits, and plan a gradual career transition. Partner with a financial advisor like those at Voice Wealth Management to gain clarity and plan for a confident transition to your well-deserved golden years.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.