This is part one of our series, “Prepare for the Flight of Your Life: Your Retirement Readiness Guidebook.”
One day, a man went to a travel agent to book a vacation.
“Which airport do you want to fly out of?” the agent asked.
“I don’t know,” he responded.
The woman seemed confused. “You don’t know?”
“Right. I don’t know.”
A long silence passed before the woman spoke again.
“Okay…” She tried another tactic. “Where do you want to fly?”
“I don’t know,” he answered.
Another long silence. “Sir, are you saying you don’t know where you want to fly?”
“That’s right.”
The woman took a deep breath before asking a third question, dreading the answer she knew would come.
“When do you want to leave?”
“I don’t know.”
Her frustration began to show. “What do you want to do on your vacation?”
“I don’t know.”
Years of experience in the customer service industry couldn’t keep her from showing her exasperation with this unprepared customer.
“Sir, you’re telling me you want to fly from point A to point B, but you don’t know where either place is, you don’t know when you want to leave, and you don’t know what you want to do? Sounds like you need to do some planning before booking your vacation.”
Of course, no one would expect to take a trip without these three things in mind:
- Where you’re starting
- Where you want to end up
- When you want to get there
Establishing Your Flight Plan for Retirement
Your retirement plan is the same way. You need to look at where you are now, figure out what you want retirement to look like, and then establish a timeline.
To make this happen, you’ll need two things: goals and a plan.
Setting Goals
When it comes to your retirement plan, think of retirement as your destination. Your destination is unique to you. No one else wants exactly what you want out of retirement. For that reason, no one else can choose your retirement destination for you.
If you don’t take the time to choose a retirement destination, then you’ll just end up where you end up. It’s the equivalent of walking up to the flight booking desk at the airport, handing over your life savings and saying, “Book me your next flight to wherever this much money will take me.” That might make for an interesting movie, but you probably don’t want that kind of uncertainty in retirement.
Knowing what you want to do after you retire makes the transition something you can look forward to, rather than being nervous about the unknown. So what do you want to accomplish after you retire?
Here are some basic questions that can help you get started in setting your goals:
- Are you planning to completely stop working?
- Where do you want to live? Do you want to stay in your current house? Move closer to the grandkids? Head south for the winters?
- How often would you like to travel?
- What big expenses do you expect? This can include buying a new house, paying for grandchildren’s college, taking vacations, starting a business, etc.
Speaking of expenses, you’ll want to consider your budget for retirement. Cost of living drops for a lot of people in retirement because they’re no longer commuting, eating out all the time, and incurring other expenses associated with having a job. As a result, a lot of people plan to downsize their monthly budget. This works in many cases, but can have some unintended consequences.
One way I encourage people to prepare in this area is to “test” their budgets first. You can do this by pretending your retired now and trying to live on that smaller budget while you’re still working. That way, if you need to adjust your budget, you can do so while you’re still earning a paycheck.
You don’t need to draw out a schedule for how you plan to spend every day – just the big picture items. Talk to your spouse, a trusted financial professional, or anyone else you think could be helpful.
Setting goals has given you a point A and a point B, so now it’s time to figure out how you’ll get there.
Getting a Retirement Plan in Place
Getting a Retirement Plan in PlaceTransitioning from your 9-to-5 life to living comfortably and securely in retirement requires a clear flight plan. This piece of the puzzle is where a lot of people become overwhelmed and throw up their hands. It seems too complicated to plan, save, and invest toward specific goals.
If you’re feeling like establishing a plan is too big of a job, we recommend starting out simply. Sit down with someone you know who you think is doing retirement “right” and ask them how they did it. See which elements of their plan could be incorporated into your own.
If you don’t have a financial advisor, consider setting up an introductory meeting with one to see what they would recommend. After all, you don’t typically plan your own flight path when you take off in an airplane. It often makes a lot of sense to consult with a professional to construct your plan.
Once you have a plan in place, it is important to stick to it. When a pilot takes off for any destination, they might have to adjust mid-flight for turbulence, weather, or other issues, but the basic plan stays in place. With your retirement plan, some situations may arise that require adjustments, but it’s important that you keep your destination in mind.
Retirement is an exciting time of life where you want to enjoy the fruit of your years of labor, but you’ll want a clear flight plan to help you realize the retirement you’ve always wanted.
Want to talk about your retirement plan? Drop us a line.
