For many people, their occupation heavily influences their identity.
Remember, back in the time before COVID-19, where you attended networking and social events? If you encountered someone new, you might first offer your name, and, inevitably, the next thing you’d say is what you do for a living.
Your job influences your mood, habits, and behaviors—it’s a major part of who you are, and because of its significance, it can make the transition to retirement much more challenging.
Instead of introducing yourself as an engineer, entrepreneur, etc., you may feel uncomfortable saying “retired.”
The concept of retirement planning can be intimidating, especially when you consider the dynamic financial and personal shifts. After all, you’ve spent half of your life building, shaping, and growing your career, so retirement may feel like slamming your foot on the breaks in standstill traffic.
You may wonder,
What happens next?
On top of the personal stress, several financial logistics can further complicate the process:
- How to get your money out of your savings and investments and turn it into regular, consistent income for the rest of your life
- Building a cash flow plan that compliments your lifestyle as you grow and evolve
- Understanding how taxes impact your retirement savings and creating a holistic strategy to mitigate their impact on your lifetime income
- Using your money intentionally so that your habits align with your goals and values
This list is just the tip of the iceberg.
Even with the mountain of changes that lie ahead, we’ve found that by building a proactive plan that considers retirement’s financial and lifestyle impacts, you can walk into this new phase of life with purpose, confidence, and hope.
Craft a Fulfilling Lifestyle Plan
Without your goals and values, money is merely numbers on a spreadsheet, charts, projections, and estimations. Your goals give your money purpose and meaning, so that’s why it’s often beneficial (and more exciting) to start with your lifestyle goals.
When first approaching this topic, people tend to think about their retirement plan in a series of big moments. You may see you and your spouse getting lost in European vineyards, buying a boat to travel uncharted waters, or playing with your grandchildren on warm sunny afternoons, as a retirement montage. No matter your big picture vision, keep in mind that it’s only a tiny fraction of your retirement lifestyle.
Retirement can last a long time, upwards of 30+ years for some. Think about all the things that happened in the past 30 years—it wasn’t just the “big” stuff. It was the busy morning breakfasts getting kids ready for school, and beating rush hour traffic to work. It’s the phone calls with friends, visits with parents, and movie nights—all the little moments that add up to a bigger beautiful picture.
The true richness of your lifestyle comes in creating a new routine. What will you do to fill your time when you don’t have a traditional 9-5 schedule? What does a Tuesday afternoon look like? How can you intentionally move about your day?
The Values Exercise
Take some time to imagine what you want your day-to-day to look like in retirement. Where will you find purpose? How will you connect with loved ones after you retire? How will you connect with yourself and grow?
We’ve seen some pretty incredible retirement lifestyle plans—and the beauty of this exercise is that you get to create something that’s completely tailored to you and what you’re passionate about.
To start, brainstorm your values. For example, you might value:
- Time spent outdoors
When you’re working on planning your lifestyle around these values, you might come up with the following ideas:
- You offer to pick your grandkids up from school every Friday and spend time with them while your kid and their spouse enjoy a date night.
- You decide that you want to host a monthly potluck-style dinner with all of your kids, grandkids, siblings, and family friends at your house (or via Zoom).
- You research what starting a vegetable garden in your yard would look like – and how you can keep it going year-round. Perhaps you even build raised vegetable gardens, furthering the DIY vibe.
- You decide you want to pursue a part-time job working at the local hardware store downtown. You like the stability and routine, plus you love the connection to your town.
- You purchase an annual pass to local national and state parks so that you can spend time hiking and enjoying nature. You make plans at least once per month to go hiking with family or friends to get the most out of your pass.
- You plan to join a local art or writing class to exercise your creative skills during retirement. A lot of community centers and online groups can help you find people with your specific interests. Perhaps you want to pursue your dream of being a novelist, or you’re finally going to write that business book that’s been in your head for decades—there are groups for that!
- You start a book club with some of your closest friends. Try to bring some structure to the process. How often will you meet? Does your club have a theme like equality and inclusivity, personal development, etc.?
- You research how you can get involved with community volunteer work. There are so many organizations that look for volunteers. Try to align your work with your interests. You may want to get more involved with church outreach, bettering the community, fostering animals, etc. It’s also great to make regular volunteer commitments. Say you help out at the community garden every Thursday afternoon—a great way to establish your routine.
- You ask your church or religious organization leadership how you can support them – possibly by volunteering a few times a week to take care of admin work, help with the on-site daycare, or lead a committee.
Just like that, you’re starting to build the next phase of your life. You’ve worked so hard to retire the way you want, now is the time for you to think about what that looks like and put plans in place to get there.
Talk to Your Partner
Remember, you don’t have to go through this process alone!
Retirement planning for couples opens up many unique challenges and opportunities. While you each have your own ideas for filling your time, it’s important to create your plans together. Listen to each other about your goals and dreams and build a plan that supports your individual goals and your goals as a couple.
You may be surprised to learn that your spouse wants to travel the world, even though their passport is long expired. Perhaps one spouse doesn’t want to retire fully and desires to keep working just in a different way.
Taking the time to talk about your plans together avoids surprises and gives you a better opportunity to grow personally and as a couple.
Let The Numbers Support Your Goals
Once you know what you want your life to look like, it’s time to create a financial plan to help support that vision.
Different lifestyles require different spending thresholds. A globe-trotting or snowbirding couple may end up needing a larger retirement cushion than a couple looking to downsize near family, for example. It’s all about knowing what you want then creating a plan to help you get there.
It may be intimidating to evaluate your investments to see if you’re on the right track, but it’s a significant step to get you ready to retire. After meeting with your advisor and going over the numbers, you may find that you’re on track to retire in a certain number of years. Or, you may find there is still some work to do. If the latter, consider the following:
- Max out contributions to retirement accounts, including catch-up contributions.
- Redirect extra income (inheritance, gift, etc.) to appropriate investment vehicles.
- Cut back on expenses and allocate them to your investments.
- Plan to work an extra year or two. Doing so gives you more time to contribute to retirement accounts and can boost your Social Security check later on.
Once you have a plan to support your retirement lifestyle financially, how can you create a plan for day-to-day spending? Build a retirement budget.
Translate Savings Into a Retirement Budget
Do you currently have a budget in place, or do you need to dig it out of the junk drawer in your kitchen?
For many people, having a clear-cut budget based on their available cash flow helps them make wise spending and saving decisions throughout their lives. So, why wouldn’t we apply that same concept to your retirement finances?
Having a budget going into retirement can help you stay organized and give you a better sense of how much money you actually need to save to live comfortably as a retiree. Creating a retirement budget doesn’t have to be complicated or restrictive.
Start by estimating your expenses. Write them down if it’s easier! Then, calculate your expected retirement income coming from your pension, Social Security, savings, and other investments.
When you subtract your total expenses from your expected income—what’s leftover? Do you have comfortable wiggle room in your budget for big-picture goals like traveling or spoiling your grandkids? Or could you cut back on current expenses to pursue the things that truly matter to you later in life, like an advanced degree or snowbirding in the winters?
Knowing the numbers ahead of time can help you to make smart decisions about some of your expenses going into retirement, like whether or not you need to downsize your home or if you should take a closer look at how you plan to pay for insurance throughout retirement.
Plan for Your Health
Your long-term health is an essential, albeit often forgotten, element in the retirement planning process. While you will hopefully retain good health for many years, you must create a plan that provides access to quality healthcare. Consider the following.
- Are you near a good hospital?
- Will your doctor and specialist be “in-network” as you transition into Medicare?
- Aside from Original Medicare (Parts A and B), what other coverage will you need? Consult our in-depth Medicare series to help give you a better understanding of your options.
- What is your plan for long-term care? Do you need to look at insurance policies?
Medical costs in retirement tend to cost a pretty penny. Fidelity estimates that an average 65-year-old couple will spend about $300,000 in after-tax dollars on medical expenses alone throughout retirement. While that number does include Medicare and other average out-of-pocket costs, it doesn’t include long-term care, which can be a big-ticket item on your retirement budget.
Building a financial plan to support your medical needs will be an immense part of the planning process. You’ll want to procure the right insurance coverage for your needs and leverage available savings outlets like your health savings account (HSA) and other investments.
Before You Take The Plunge, “Test Drive” Retirement First
Think about retirement like starting your own business—your personal brand.
You likely can’t build a compelling, profitable, efficient, and fulfilling company on hope and dreams alone. You need a solid foundation to help it thrive. The same is true for your retirement life.
You want to have a well-thought-out proof of concept before moving forward with any retirement strategy. You’d hate to put time, energy, and resources into selling your house and moving out of state only to learn that you hate the climate and miss your friends.
An excellent option is to “test drive” both the lifestyle and financial elements of retirement first before going all in. Doing so can help you work out the kinks in your plan. You might realize that you want more spending money to travel or perhaps you don’t spend nearly as much as you anticipated.
Start by test-driving your retirement budget.
Spend a few months before you begin retirement, living within the total retirement income you expect to receive each month from Social Security, your pension, and distributions from your savings.
- Does the budget you created make sense?
- Do you find that you’re over or underspending in some categories?
Now is an excellent time to reevaluate your planned retirement budget because you have a better idea of what works and what doesn’t.
As much as possible, it’s incredibly beneficial to test drive your lifestyle plans ahead of time. A test is critical if you plan to make a dramatic change, like moving south for the warmer weather.
Using this example, you might take an extended vacation pre-retirement to the area you’re planning on relocating to. Is it enjoyable to live there full time? Will you want to do this long-term, or would planning an annual vacation during the winter months make more sense?
Ironing out the details before retirement can bring more confidence and clarity when you’re ready to take the next step.
We love helping people align their money with the things that matter most to them. Your goals and values propel the planning process and help make your life the best it can be. We want to help you use your money with purpose, vision, and confidence.
Since your lifestyle plays such a critical role in your retirement plan, we are pursuing more continuing education to enhance our advice and service around these topics. Stay tuned for more content that considers the non-financial, goal, and value-driven lifestyle elements that make up your retirement plan!
Get in touch with our team if you’d like to discuss creating a financial and lifestyle plan for your retirement.