Deciding to retire is a huge decision. Particularly if this means selling your company, starting to withdraw on your pension or giving up a position you’ve worked years to attain. When you decide to retire you are entering a new stage of life. It is a transition not very different from graduating college, getting married or having kids. Given the way our society has placed some kind of status symbol on having the “ability to retire,” we see many people rushing to try and retire before the decision has been thoroughly evaluated.
Here are the top three things we believe you should consider when thinking about retirement:
1. Can you live on what you’ve saved? This is the first consideration because if you don’t have enough money to live on, you don’t have much of a choice. For some, this is an easy answer and you must keep working. For others, knowing whether you have enough saved to live on can be a confusing calculation.
We’ve written about this before, but it depends on your age. If you are like most Americans, you likely need 15-25x your annual living expenses before you can retire. We also like to use conservative assumptions and plan for you to live until at least 100 years old. We are happy to help you determine exactly what the number is for your specific situation.
2. What are you going to do in retirement? The main reason people want to retire is because they want to control their time. However, many don’t really know what they are going to do with their time once they retire. While having more time to spend with loved ones, pursue your passions and serve your community are worthy pursuits, we would challenge those retiring for the purpose of being able to just do “nothing”.
We believe we were all created for meaningful work in some capacity. What that work is can differ vastly, however, without anything meaningful to pursue we find individuals lose meaning, purpose and self-worth. Those with purpose tend to live longer, healthier lives.
We recommend before you retire, outline how you plan to spend your time. Focus your outline on two areas: people and passions.
3. How do you protect against the unknown? Two thirds of people over the age of 65 have a long-term care event during their life. This means they need to pay for help with at least two activities of daily living (going to the bathroom, dressing, eating, etc.). This can easily cost $6-8K per month and is often a tremendous drain on your and your family’s resources. We recommend having long-term care insurance setup to ensure you are protected. This is something we can easily give you quotes on if you are interested.
Additionally, a collapse in the value of your investments can destroy your retirement plan. Please ensure you are working with an experienced financial advisor who will create a diversified portfolio of uncorrelated assets.
If you are near retirement and these are important considerations for you, we would be happy to provide a free initial consultation to discuss further. Just respond to this email with a few times that work for you to get together.