As a financial advisor, I have the pleasure of working with and speaking to a vast number of very different people. Everyone has their own story, different circumstances and a unique explanation of how and why they ended up in our community. Many of the conversations I have are with neighbors that are either in or approaching retirement. Fortunately, many people to whom I have spoken have thought about what they want their retirement to look like. However, for most people, getting to retirement has been the goal, and it’s not until they’ve retired that they start thinking about what their retirement will look like.
The good news is, even if you’ve already retired, it’s never too late to start planning. Not surprisingly, the most common question I get is ‘How much can I afford?’ While that is an important question, it shouldn’t be the single consideration when you’re planning for your future.
Here are a few other questions to think about in order to define what “retirement” means to you:
1) Have you considered a “second act” career in retirement?
According to a Charles Schwab survey published in 2019, more than 40 percent of people within five years of retirement said they wanted to continue working in retirement. Whether you’re scaling back hours at your current job, planning to embark on a new career, or pursuing a passion project, this has some practical advantages when it comes to retirement planning. Along with the benefits of staying active, by continuing to earn a paycheck, you mitigate the need to deplete existing savings.
2) Would you rather take “mini-retirements” and postpone long-term retirement?
While most people still envision retirement as a point later in life when they stop working altogether, the idea of taking time off from work for extended periods—to travel, raise a family or simply take a break—at various life milestones is becoming more common. If this sounds appealing, it will require some diligent planning and saving along the way and will impact the way you think about saving for a traditional retirement down the road.
3) how important is it to leave a financial legacy?
Ask yourself, would you rather spend every penny or leave money to family, friends or a charity after you’re gone? This answer will impact your financial decisions in retirement. Estate planning isn’t just for the ultra-wealthy. Most people should create a basic estate plan, including a will that outlines how they would like their assets to be distributed.
4) Do you and your spouse or partner have the same retirement lifestyle vision?
If you are in a relationship, it’s a good idea to get on the same page when it comes to retirement. Do you want to be active? Are you planning to stay in your current home or retire elsewhere? These questions will not only help determine how much you need to save, but also can inform whether you will merge your finances or keep some separate to meet differing goals.
5) Do you have a plan for funding your retirement once you decide to tap your savings?
You’ve spent most of your life saving, so before flipping the switch, make sure you have a plan in place for how to make those savings last. To do this, consider consulting a professional to help you create a retirement income plan and start with the basics:
- Choose an appropriate mix of conservative and aggressive investments to provide diversified sources of return.
- Determine how much you need to withdraw on an annual or monthly basis.
- Learn about products and services designed to help manage and deliver retirement income.
As an advisor, I like to work with my clients to anchor their financial expectations. This often involves discussions about financial planning, their lifestyle and any potential legacy considerations. While it may sound limiting, in my experience, for most clients the process is quite liberating. It helps inform them as to what is possible during their ‘Golden Years’—which for many will extend over three decades.
Keep in mind that whether it’s starting a second career, serving your neighbors, volunteering or leading an active life, how you spend your retirement is ultimately a personal choice. If you would like help thinking through these questions, you can visit a Charles Schwab branch and talk to a financial advisor. Schwab has also created a card game called “The Next Chapter” with more retirement questions to explore.
Article by Fred Gaskin at Charles Scwhab Beaufort / Bluffton
