I am not yet retired, and the way the financial markets have acted over the past decade, I may never reach that point.
However, I would rate my knowledge of retirement well above average because I have had the privilege of living vicariously through hundreds of retired clients over the past 17 years.
The number one fear in retirement is simple: running out of money.
If I earned a nickel for every time I face the “do I have enough money to retire” question, I would have a continuous stream of annual income that would make a multi-level marketing executive blush. The answer to the money question depends on several specific factors, and if I could answer that question for you in one column, every financial advisor would be out of a job. That question is for your advisor to discuss with you one on one, after they know all of the pertinent facts.
After the economic fears have been addressed, there are other aspects of retirement that can be both scary, and very daunting. Everyone knows to worry about the money as they approach retirement, but very few take the time to consider the following:
WHERE TO LIVE
The assumption is that the retired couple will remain in the same home throughout retirement. Upon further inspection though, after asking the question, I often hear about plans to move closer to grandchildren or possibly purchase a mountain home. No matter what the future holds, any decision regarding houses will have financial impact, either positive or negative, and should be considered carefully with your advisor.
Questions to consider: Can you afford that mountain home? Would you pay cash or have a mortgage? If you borrow, how would you structure your mortgage? If you sell your house, what are the tax implications and how will the funds be managed afterwards? How does the cost of living in Greenwich, CT compare to Fort Mill, SC and what adjustments need to be made to make sure your financial plan is not derailed?
Usually the largest component of a retiree’s living expense is healthcare. This needs to be addressed BEFORE reaching retirement age. School yourself on potential options for coverage, as well as the advantages and disadvantages of Medicare. Also, if you spent your working years “busting your hump” for a large employer, know what options they offer for retired workers – it is sometimes possible to negotiate healthcare into an early retirement package. Think of it as taking less up front money in exchange for your old company paying all of your doctor bills.
Questions to consider: Does a long term care policy make sense? What are your biggest genetic health risks? What will be your healthcare costs in retirement? What medications are you currently taking and are there generics available?
ADOPT A HOBBY
What is the one thing that you have always wanted to do, but never had the chance? Opportunity approaches your door to knock once you are fully retired. In the words of Nike: just do it. Many times a non-working spouse can get territorial once the other spouse retires. There is an extra person at home, and that can create animosity, at least initially. My father says “familiarity breeds contempt” and he is a wise man that has been happily retired for 15 years. Start a small business, take up golf, take a solo road trip…..anything, just get out of the house!
Questions to consider: What current hobby would you like to improve (i.e.…golf)? Would your new hobby be something you could do with your spouse, or would you prefer to go it alone? What kinds of dollars would be required to delve into this new hobby and can you afford it?
PLAN YOUR ESTATE
Most retirees have a basic will, and for some, that might be enough. However, now that you are retired you have the time to sit down with an estate planning attorney and dictate exactly how you want your family’s assets to be divided. It will cost you some money, but in many cases, could also save you thousands. If you and your spouse do not decide who to leave your million to, the probate court will happily divide it up as they see fit.
Questions to consider: Do you have a will? When was the last time your estate plan was updated? What is your peace of mind worth to you? Do you have potential heirs that you wish to exclude from your estate? Who will be your power of attorney if you become mentally incapable of making decisions?
MIX AND MINGLE
Please do not forget to have a social life. You’re retired, not dead. Maybe this involves joining a regular card game, or inviting neighbors over to form a dinner club. Some people like to travel with other retirees, while others prefer to spend every spare second with their grandchildren. The point is, you have worked your entire life so that you can do what you want to do, so don’t waste your time.
Questions to consider: Would you like to join a poker/spades/hearts/bridge club? Who are your best friends and what activities are they interested in? If taking a group trip, would you prefer airline travel or driving? What will those potential trips cost and does that number fit into your budget?
I am not advocating choosing a coffin and pre-paying a funeral home. If you own such an establishment, feel free to hate me, but I am not a believer in that whole process. What I am referring to here is to spell out in writing how you want your funeral to proceed. There are not many things worse than grieving loved ones wrestling over “how Dad would have wanted it.” Do not put them in that spot.
Questions to consider: Who will preach your funeral? Where will it be held? What music, if any, would you like played? Are you a proper burial type or a cremation type? Approximately how much money will your ideal funeral cost and have proper funds been set aside?
Obviously, there are hundreds of other decisions that arise when considering retirement, but these are some of the most problematic ones that I have come across. The important thing is to begin to consider these topics – a decision does not have to be made today. However, if you procrastinate on these things, you will likely be faced with some post retirement headaches. Once retired, you have all of the free time you have coveted for years, but don’t waste that time negotiating the boring stuff.