Deciding when to retire can be one of the biggest decisions of your life. If done right, you will only do it once, so it is important that you take the proper steps to ensure a part-time job as a Wal-Mart greeter is not required to make ends meet when you’re 80. Here are five things you must do give you the best chance at retirement success:
- Make a plan: I know, it is not surprising coming from a retirement planner that the most important thing is to put a plan in place. Although this advice may be a conflict of interest, it doesn’t mean it’s wrong. There is no single more important thing that you can do during your retirement than to plan for it. Working with an expert that can lay out your cash flows, optimize your assets, help you navigate government programs such as Social Security and Medicare, and developing a framework for your future is vital. This is the cornerstone from which your retirement will thrive.
- Stress Test: I’m an optimist. I believe every endeavor I dive into will work out with tremendous success. It’s how my brain is wired. However, in reality, this is not always the case. The best laid plans are often derailed by unpredictable or even unprecedented events. That is why trying to anticipate the worst-case scenario in your retirement and understanding the results of your plan if it comes to fruition is important to having confidence as you enter your retirement. Many retirement plans are based on “average” rates of returns. However, only understanding the average is a common mistake. If my feet are in the oven and my head in the freezer, on average I am comfortable. Variability is an important component to a plan and understanding this will make you well prepare as you march headlong into retirement.
- Health Insurance: How will you pay for your medical expenses in retirement and how much will it cost you? For those over 65, the answer is relatively simple. Applying for Medicare and purchasing a supplemental policy is almost certainly your best and most cost-effective option. However, what if you or your spouse are younger 65 when you retire? Health insurance costs can be an excessive portion of your budget and may not cover as much as you think. Do your research and understand what your costs will be before making the jump into retirement.
- Social Security: Make sure you head into retirement with a well thought out plan of when you will draw on your Social Security retirement benefits. There are a lot of options for drawing your benefits and if you have a spouse, the options grow exponentially. It is often a tremendous mistake to just assume you will collect as soon as you are eligible or as soon as you retire. Take your time, talk with an expert, and make the best decision for you and your circumstances before you retire.
- Retire to Something: Your mental health in retirement is just as (if not more) important than your financial or physical health. Most people retire to escape something (the rat race, a difficult boss, a job they never liked), but very few think to retire to something. It is important to find purpose or meaning in your retirement. Retiring and sitting on the couch watching game shows is no strategy for retirement bliss. Spending time with love ones, volunteering, building a business, or seeing the world are all noble objectives that can lead you to happiness. Think about what you will be retiring to so you can be not only financially comfortable but loving every minute of it.