A key question to ask: What does retirement mean to you?
What does retirement mean to you? It’s an important question to ask – and there are no right or wrong answers.
Retirement used to mean one thing: You’d clock out of work one day and be retired the next while being assured of collecting a pension as you lived out your golden years.
Now, however, the expectations of retirement are very different. Many people live longer and healthier lives. Most people no longer have pensions and they must rely on their 401k plan or IRAs to fund a retirement that may last decades instead of just years. Some people of traditional retirement age may want to shift gears into an encore career, pursue a cause or projects that have been calling to them for years, or even simply cut back on work hours so they can have more flexibility and more leisure time while still working in a field they love.
Clearly, there is no longer a one-size-fits-all definition of retirement. The typical retirement age is just a number, and for many, it is the beginning of some of life’s best and most fulfilling years.
While the ideas and practicality of retirement mean different things to different people, a common thread through all the various retirement scenarios is the need for financial planning. Here are some questions to consider as you approach traditional retirement age.
What Does Retirement Mean to You?
First, ask yourself what retirement really means to you. Do you want to keep working on passion projects or spend more time with loved ones? Focus on what you want to do, as it is not only important for your sense of fulfillment, but it will also help you plan your finances accordingly.
Do You Feel Ready to Retire?
While the IRS and Social Security Administration prescribe retirement ages, that doesn’t mean you have to give up the job you love before you’re ready to. On the other hand, if you’ve always dreamed of retiring early, you might just need help making a plan that works for you. The only one who should decide whether it’s time to retire is you!
How Much Do You Need to Retire Confidently?
There is no magic formula that tells you how much you need to save, especially since your costs will depend on what you want to do with your retirement years. To help create a clearer picture, use your current cost of living as a baseline, then add on factors like inflation and lifestyle adjustments. Remember, you’ll likely have more time on your hands once you’ve stopped working, so think about how you’ll spend it – what will your hobbies and other activities be? And what might they cost? Our team can help you with this process. If you’re considering an encore career or cutting back slowly on your work hours, our advisors can help you plan for that, too.
Have You Considered Health Care?
Healthcare needs typically increase as we age, which leads to higher medical costs. Planning for these ahead of time helps ensure unexpected expenses don’t unnecessarily burden you or your loved ones. This includes understanding Medicare and supplemental insurance options, estimating potential out-of-pocket costs for chronic health conditions, and considering the need for long-term care.
What Income Streams Do You Have?
Take into account all of your sources of retirement income to gain a complete picture of how much money you will have coming in. These could include:
- Savings, pensions, and retirement accounts
- Investments
- Income from life insurance or annuities
- Social Security benefits
Once you’ve done this, compare this total retirement income with your intended spending habits. If there is a gap, let us help you close it by making some adjustments to your investments or broader financial plan. If you want to continue to work in some fashion – part-time, self-employed, or in a different career – it will help extend your retirement savings. We can help you determine by how much.
Have You Created a Plan For Your Retirement Savings?
A sustainable strategy for living off of your savings involves deciding how much to withdraw, while also understanding the timing, order, and tax implications of these withdrawals. This includes navigating required minimum distributions (RMDs), deciding between withdrawing from tax-deferred or tax-free accounts, determining a Social Security strategy, and considering your overall tax liability. A well-structured plan maximizes the longevity and efficiency of your retirement funds, helping you preserve more wealth to support your lifestyle and legacy goals. It can also minimize the risk of outliving your nest egg.
Whatever your WHY is, the Elevage team can help address your concerns and assess your retirement readiness. We welcome the opportunity to help you prepare for and enjoy a fulfilling retirement – however you may define it.
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