Considerations for Your Retirement Timeline
Use These Tips to Consider When it May Be Appropriate for You to RetireKathy Longo, CFP®, CAP®, CDFA Monday, 14 December 2020
The following article is based on the content covered in my book, Flourish Financially: Values, Transitions, and Big Conversations. If you’d like to read more, you may purchase a copy here.
Retirement is an exciting topic, but it can also be fraught with uncertainty, given the fact that many people will face a long retirement period of thirty years or more. When is the right moment to retire? What is the best retirement timeline for you? Unfortunately, there are no simple answers to these questions.
While many factors need to come together to make a cohesive and sustainable long-term plan, the biggest concern most people face is the fear of making financial decisions based on emotion. Here are some tips for decreasing retirement anxiety and increasing clarity on the road to sound retirement planning, including answering that very important question of “when.”
Tip #1: Think Long-Term
Although many people plan for retirement with aspirations to live a certain lifestyle, they rarely understand that retirement takes place in phases. The early years of retirement are often an opportunity to pursue activities that might not have been an option during your working years, such as traveling. Retirees are often still in good health, excited about their new lifestyle, and ready to do the things that they missed out on while they were working. For this reason, this early phase is usually more expensive than your existing lifestyle.
The pace of the second phase of retirement is more leisurely. People start slowing down, traveling a bit less, and considering lifestyle options that are closer to home, such as spending time with their children or grandchildren. Expenses tend to decrease during this phase.
In the third phase, many retirees will see their health care costs increase or need additional resources to stay in their homes. This can be particularly true if you have a family history of health complications or, conversely, of living far past average life expectancies.
Failing to plan and save for all three phases can derail your retirement plan. A long retirement timeline means being prepared for the entire twenty-five-plus years – or more – ahead of you.
Tip #2: Identify Family Influence
Most people plan for retirement with an emphasis on their personal goals, or the goals and values they share with a significant other. However, it’s also helpful to identify potential family commitments that might affect your retirement plan.
A long-term plan for retirement may include a family gifting component for the next generation, but it may also need to include contingency plans for situations in which your children or grandchildren need immediate financial assistance. I have worked with a number of clients over the years who have had to help keep their kids’ families afloat or cover medical or living expenses for family members. It’s important to consider these possibilities, as they may require you to plan for contingencies to cover additional expenses.
Tip #3: Get Started Early
Early retirement planning gives you more options and opportunities to control the terms of your retirement than waiting to make a plan. It is the best way to improve your chances of accomplishing your retirement goals. Even with advance planning, however, it can still be hard to turn off the final paycheck and begin living off your portfolio. Building a retirement plan many years before retirement occurs creates more flexibility over time to incorporate unexpected needs or expenses into that plan.
Tip #4: Empower Yourself
It’s fairly common to have a myriad of retirement accounts with overlapping objectives, such as IRAs, 401(k)s, insurance policies, bank accounts, and other investments. Since most people are simply too busy working and saving to keep all of these accounts organized effectively, empowering yourself through financial organization helps to create a structure for your planning process.
Another opportunity to empower yourself in preparation for retirement is to schedule routine financial tune-ups. Similar to keeping your car in good shape, scheduling financial tune-ups creates time to check on your savings and spending goals so you stay on track with your retirement goals. This is a great time to reflect on potential life changes over the past year (family, work, lifestyle) that may have created opportunities to accelerate your retirement timeline, or potentially delay your retirement. Review your portfolio to make sure it still aligns with your retirement timeframe and, possibly, rebalance investments to your targets if that can be done without creating a significant tax burden.
For many, trusting in a retirement plan that they proactively created to resolve any challenging issues in retirement is a source of comfort. Retirement planning can bring up a range of feelings and knowing that they have diligently planned for a variety of contingencies can help even the most nervous people feel better.
Final Thoughts on Deciding When Retirement is Appropriate for You
The transition from working full time to retirement raises all types of emotions – and all sorts of questions. Chief among the questions is when you should retire. This is a very personal decision, and the answer will be based on many factors, but the four tips above should help you as you plan your own unique retirement timeline.
If you found this article useful, I invite you to consider purchasing my book, Flourish Financially: Values, Transitions, and Big Conversations. You may do so here.
About the Author
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.