Can You Afford to Retire?

Have you ever seen someone working who's clearly old enough to be retired and wondered whether that person had to be there or wanted to be there?

It could be an older gentleman bagging groceries or a woman working the register at a department store. It might be the guy who owns the gas station down the street or the crossing guard at your children's school.

If you don't know them, you can't know their reasons.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.

Sign up

There's a man I do know, a local businessman, who was certain he wanted to retire when he was 62. He sold his business, invested his money and got ready to relax. Then the market tanked in 2008, and he watched his investments slowly dry up. His business was gone, so he got a 9-to-5 job in an office. Now he's in his 70s and just starting to think he can retire again.

Something similar happened to three teachers I know, who thought their investments would last through retirement. They didn't realize how much risk they had—and they probably didn't ask. But they, too, were victims of the 2008 financial crisis. And they, too, are still working.

They've all lost so much time.

I often talk to my clients about the "3 Ps of a Successful Retirement:"

1. Plan: People who achieve long-term success don't do it by accident. The greatest structures, companies and countries are built with a plan. Your retirement is no different. Dream big, but plan to achieve that dream.
2. Protect: If you've built something over time, you don't want to lose it overnight. If you spent 30 years building your nest egg, shouldn't you protect that money first and worry about growing more money second?
3. Prosper: Those who plan their future and protect their past typically prosper through retirement.

1. Income

Your assets might look good on paper, but how much income will they actually provide in retirement? Social Security will play a role in your plan, but for most people, it only gets them part way. With proper asset allocation, your money can work more efficiently to provide more income. A financial planner can help you set up the best strategy using your existing assets.

2. Annual expenses

Your living expenses may change once you retire—or they might stay the same. Do you want to travel around the world or take a road trip to all 50 states? All this needs to be planned out. Building a good expense plan with a financial planner may help you uncover ways to lower your costs now and later.

3. Medical costs and long-term care

Medicare will cover many of your health costs, but it doesn't pay for everything. You'll need to include supplement costs in your plan. And if you retire before you're 65, you'll need to buy your own insurance until you're eligible for Medicare.

You'll also have to plan for long-term care costs, which typically are not covered by your health plan. Long-term care insurance is an option, but it can be costly. A financial planner can help you develop a strategy that can reduce the risk of unknown medical costs. Innovative alternative strategies provide protection in case of a health crisis and safeguard your legacy.

4. Longevity risk

We're all living longer, which is great, but it also means your money needs to last longer. How do we know how much money per year we can withdraw from our retirement assets? You don't want to take too much and run out of money, but you don't want to take too little and miss out on the lifestyle you want. Your adviser knows there are options on the market that can manage risk and guarantee you won't outlive your money.

5. Legacy

Will your spouse be taken care of if you die first? Will you be able to pass on a legacy to your family? How will this all be taxed? These are all questions you want to answer before taking the plunge into retirement. Building a legacy is one of the cornerstones of financial planning. A good adviser can structure a plan that passes the money to future generations tax-free.

Max Hechtman is an Investment Adviser Representative and insurance professional. He is a partner and president of the California-based Max Wealth & Insurance Solutions. His goal is to help his clients work towards a safe and conservative retirement using financial vehicles.

Kim Franke-Folstad contributed to this article.

Investment advisory services offered through AE Wealth Management, LLC. All insurance products are sold through Max Wealth & Insurance Solutions. CA License #0H29034.