As retirement approaches, you probably have some vague ideas of what your life could be like. But if you want a clearer vision of how the retirement you want may be tempered by financial realities, it’s always good to start thinking about important issues long before you permanently leave the workforce. The following questions can help you clarify your thinking and identify where you might need more thought and planning.
Location, location, location
Whether you stay put, permanently move somewhere else or spend your winters in warmer climates are key decisions that will affect your retirement lifestyle.
Ask yourself:
- Do I want to downsize, move to a different city or state, or stay put?
- If I stay put, can I keep up with home maintenance?
- Is it important for me to live within driving distance of my children, siblings and friends?
- Will I be close to the activities I want to pursue?
- Will the cost of living be higher, lower or the same in a place where I might want to move to?
- Are medical facilities nearby?
Work, play, or both?
A life of leisure may seem appealing, but will be it enough?
Ask yourself:
- Do I want to—or will I need to—work part-time?
- Are there volunteer jobs I’d like?
- Will I miss the social aspects of working?
- Will my hobbies keep me busy enough?
- Could I end up with too much time on my hands?
Living expenses
Depending on where and how you live, you may find that your nest egg may not be large enough. That's because, contrary to common thinking, most people don’t spend less during their initial years of retirement. And even if they do, many don’t anticipate needing their savings to last long enough to help fund their living expenses if they live well into their 90s.
Ask yourself:
- What are my current expenses and how will they change?
- What specific costs may increase or decrease, and by how much?
- Have I created a retirement budget?
- Will my assets last long enough, especially if an unexpected healthcare crisis occurs?
Sources of income
At first glance, it may seem that between Social Security, pensions and money saved in 401(k) plans and IRAs you’ll have enough money to live the way you want to. But could you be doing more?
Ask yourself:
- What will be my potential sources of income be during retirement?
- How much money do I have now, and how much do I think I’ll have when I retire?
- Should I contribute more to my retirement accounts while I’m still working?
- At what age should I start taking Social Security benefits?
Health-related expenses
The older you get, the more money you’re likely to spend on healthcare-related costs. And if you or your spouse requires long-term care, these costs could consume much of your savings.
Ask yourself:
- How many years do I expect my retirement to last?
- When should I enroll in Medicare and which coverage options should I choose?
- Does my or my family's medical history point to higher risks of cancer, dementia, or other acute medical conditions?
- Might I need long-term care at some point, and if so, what can I do to keep these costs manageable?
- Have I assigned someone I trust to serve as my healthcare proxy if I'm no longer able to make healthcare decisions on my own?
These are all complex issues that aren’t easy to resolve on your own. Consider answering as many of these questions as possible ahead of time and then meeting with an experienced financial planner to help you better understand your financial realities--and what you may be able to do to make more of your retirement dreams come true.
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Chris Gullotti is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or cgullotti@canbyfinancial.com
Authored by the Retirement Consulting Services team at Commonwealth Financial Network with additional content provided by Canby Financial Advisors.
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