Have you ever had a conversation with a friend or family member that starts off sounding something like this? “When I retire, I’m going to….” Odds are, you have either had this discussion or spent time at work dreaming of all the things you will do once you retire. These are fantastic and enjoyable conversations but what is typically ignored while visualizing the “retirement dream” is how to make this dream a reality. Unfortunately, this lack of a plan can lead to anxiety that can dampen the excitement of your dream. By creating and executing a clear and defined plan, supported by the data of your financial situation, you can not only remove the fear of the unknown but get back to enjoying your dream.
When we start to look at retirement, it’s crucial to ask some important questions and do some self-exploration.
- When can I retire?
- How much money do I need to retire?
- How much can I spend in retirement?
- Will I run out of money?
- How do I cover healthcare costs?
- Will I be able to leave money to loved ones?
A Wealth Advisor specializing in retirement planning will help you answer these questions and even address issues you have not considered. A good advisor will discuss what expectations you have for retirement as well as your concerns. Let’s take a look at the often overlooked expenses when planning for retirement that need to be considered: Your basic living expenses, travel expenses, new vehicles, taxes, required minimum distributions, health care costs including dental (Medicare does not cover dental expenses), your changing spending patterns, home maintenance costs, etc. As you can see, there are many layers when looking at your retirement expenses. Working with a Wealth Advisor will help you create a customized road map to guide you to your personal retirement destination and reduce anxiety by making the previously unknown, known.
As you begin the retirement planning process, it’s important to start by envisioning what you want your life in retirement to look like. This comes down to identifying goals and objectives that funnel into one of three different buckets of needs, wants and wishes.
Many times people dream about their wants and wishes in retirement but overlook the more “boring” items of needs. Although this is not the “fun” part of retirement spending, this is crucial as these are items that you need on a daily basis and are non-negotiable. Some examples of these items are utilities, groceries/food, healthcare, etc. Again, this might not seem like the most exciting bucket of items to contemplate but it is the most foundational and is the one that your retirement plan should be built upon.
The next stage of planning is the “wants” bucket. Often, this bucket is where people mistakenly start because it is an exciting part of retirement. The “wants” bucket is comprised of items such as college funds for kids/grandkids, travel, leisure activities, the flashy new vehicle, the next phase of home improvements you’ve wanted to complete and/or a new home. Although these are fantastic goals and oftentimes attainable, it is crucial to make sure this bucket is completed only after the needs bucket is taken care of.
The last bucket is the “wishes” bucket. This is the bucket you most likely see when you close your eyes and dream of the ideal retirement. The wishes bucket is an extension of the wants bucket and can include things like a vacation home, luxurious travel, or a legacy you want to leave behind to impact your family or favorite charity.
The question often asked is “When should I start planning for retirement?” There is an ancient Chinese proverb that sums this question up very well: “The best time to plant a tree is twenty years ago. The second-best time is today.” Time, like everything else, is a scarce resource. The more you have of it, the better positioned you will be for success. Therefore, it is essential to give yourself enough time to make appropriate changes that can positively impact your ability to live the retirement you have worked for and desire. The closer you get to that magical date of retirement, the less time you will have to make the necessary changes to offset any unexpected hiccups that appear along the way. When your retirement date is within five years it is crucial to solidify your retirement plan to effectively manage all the variables that exist.
Retirement is the destination you have worked towards throughout your entire career. You have discussed and dreamt about all the things you will do when you retire. Retirement planning is the process of making your dream a reality. This is why it is critical to connect with a financial professional to discuss your expectations and fears about retirement and put yourself in the best possible position to live the retirement you want. Please contact GreenUp Wealth Management so we can discuss your Needs, Wants, and Wishes, and work with you to create a roadmap for your retirement journey.