Get mentally prepared
View From the Top
I like to seize opportunities. I never expected when I was rowing in my 40s and 50s that I'd still be rowing in my 70s. My retirement has given me more flexibility and ability to travel. It's like my daughter says, "I really want to go to Cuba. Do you want to come with me?" And I say, "Yes."
But there is a cost. I've always found that either you have the time or you have the money. But you don't seem to have both together. I have to keep in mind that money needs to last me and therefore I need to stay somewhat on budget.
When I first retired, TIAA looked at my budget and told me how things were going. She was very reassuring. You've worked hard for this. Now's the time to spend it.
Plan with your spouse or partner
- Plan your future lifestyle. Determine if the lifestyle you want in retirement can be supported with what you have saved. If the answer is yes, you’re in great shape. But if the answer is no, you may need to consider some tradeoffs, such as delaying retirement or deciding to work part-time for a while. Both you and your spouse should be aware of your joint financial situation to determine the amount of income available in retirement and to agree on goals for this time.
- Determine what you want to spend. How do you envision spending your money? Are you planning to use all your savings, or do you want to leave money or assets behind for your family or for a charitable cause? Finding a balance you both agree on is vital to retirement planning.
- Think Ahead. Are there things you definitely want to do in retirement? For instance, do you plan to develop new hobbies? If so, you may want to prepare before you retire. If you plan to buy a sailboat, and you haven’t learned to sail, consider investing in lessons while you’re still earning an income. Other priorities to consider researching prior to retirement include:
- Do you plan to travel?
- Would you rather move closer to the children and grandchildren?
- What social activities, such as volunteering or charity work, would you like to do?
- How much do you want to spend on leisure activities?
- Discuss the emotional impact. While exciting, the journey ahead will also be an adjustment. For some people, ending a career can result in low self-esteem, and less income can create stress and anxiety. Discuss expectations for this time with your partner and create an action plan to combat any anxious feelings when they arise. You’ll want to be sure both you and your spouse are ready to retire, and you may want to discuss the possibility that one of you may want to continue working longer than the other (see below).
- Decide on timing. If you and your partner are both currently working, you’ll want to consider your combined resources. Do you want to retire together or stagger retirement? The latter will allow one of you to continue making contributions to a retirement account. It will also likely allow you to extend healthcare coverage, delaying the heightened out-of-pocket costs that will follow when both of you retire. But note, according to the IRS, you can’t make regular contributions to a traditional IRA in the year you reach 70½ and older.1
- Consider your health. As couples age, they must think about their health. Have you saved enough to care for each other if one of you gets sick? Have you discussed your estate planning needs with your attorney? Is your Will and/or Trust in order? Have you considered creating a healthcare proxy for the future and electing someone to legally make healthcare decisions on your behalf? What sort of long-term care would you eventually like to receive? For more information on some of these issues, see our section on long-term care below.
- Reconcile differences. Inevitably, you and your partner will not agree on every detail. That’s understandable. But if the differences are stark, independently make a list of individual goals and activities, and then pare down the list by finding common threads. For differing items, rank the importance of each for yourself. Then, develop a list of common goals and prioritize those.
The importance of budgeting
- Be honest and specific. Consider how you envision your life in retirement. Begin to assign costs to the items on your wish list, whether those items include a new hobby, road trips across America in an RV, or twice-daily massages in four-star resorts.
- Consider spending changes. You’ll face new expenses in the years ahead, such as Medicare supplemental insurance if you were previously provided insurance through your employer. But you may also save money, perhaps through reduced commuting or dry-cleaning costs. Mainly, you will no longer need to save for retirement. If you set aside a sizeable portion of your take-home pay each month, this savings can be significant.
- Think about long-term care. No matter how great your health is now, it’s likely you’ll need help at some point, so give thought to the kind of care you’ll eventually want to receive. Will you want to remain at home with part-time care, or move to an assisted living facility?
- Continue to adopt a save-first mentality. As with all phases of life, you have to be smart about money during retirement. Continue to track your spending and net income (the money you make after taxes and benefits are deducted), use insurance and other planning tools to help protect you from life’s bumps, and understand how your dreams and your financial reality line up. These are universal characteristics of being a smart saver, and just as they helped you when you were younger, they’ll help you throughout your retirement as well.
Some next steps
- Consider covering essential living expenses with guaranteed income
- Be smart about Social Security and taxes
- Factor in healthcare expenses