We all dream of what retirement will be like and the adventures that await us. Years of diligently saving, being good stewards with our money and deferring many of life’s pleasures are a large part of how many prepare for what they hope will be a time they can become fully immersed into their bucket list and experience life like never before.
For most, the primary focus during our working years has been about that next career opportunity, building our business or maximizing earning potential. While at the same time, building a nest egg that may need to last 20, 30 or even 40 years. For those with an eye on the future, that’s what we’ve been taught to do, and rightfully so.
Having the proper “retirement mindset” could be the difference between uncertainty and worry as we age vs. having that feeling of freedom to create new and exciting memories during our golden years.
Truly understanding the following three things can be the foundation of the right mindset and an amazing retirement.
1. Accept that the Rules of the Game Have Changed
This may seem obvious, but let’s go deeper. For most of our adult years, we have been in the accumulation phase of life. Because time was on our side, we understood the importance of being regular savers by using tools like 401(k)s, IRAs and brokerage accounts to name just a few. Even though it did matter how we saved, it was more important that we saved. By being systematic in our approach, we were able to take advantage of down markets by buying more of our investments, yet able to rejoice when markets were up as we saw our wealth increase.
However, as we transition into retirement, our focus needs to change from one of accumulation to one of preservation and distribution. The strategies and the tools we used to help us build our net worth are COMPLETELY different from those strategies and tools needed to ensure our freedom to make choices in retirement.
Some things to consider include:
- Moving from passive to active investment management.
- Separating your nest egg for different purposes so money is not co-mingled.
- Finding the right mix of investment, insurance and banking-related products that are appropriate for YOU.
2. Realize that Life Is No Longer on Autopilot
How much of our financial foundation has been on autopilot during our working years? A strong foundation should include a plan for our income, investments, taxes, health care and legacy. For many of us, these five parts of our financial life likely were on autopilot in some way.
What has been our income plan to this point? Basically, it’s the paycheck that shows up in our bank account every other week (or the revenue that flows in every month for business owners). Our investments may be biweekly contributions to our retirement plan at work that we just set and forget. Tax planning many times is just an afterthought, as we get accustomed to similar tax liability from one year to the next. Health insurance may just be a benefit offered by our employer while our legacy plan could be a will we drafted years earlier when our children were young.
Can you see a pattern here?
Unfortunately, when we leave our job and exit our career, we are left to create strategies on our own to address each of these five areas. This can leave us feeling paralyzed to adopt new ideas and lead us back to doing what we already know, using generic and outdated strategies that are not specific to us.
Instead, you need to commit to being an active participant in creating a customized plan that accounts for all five of these parts. Understand your own ability and desire to create these strategies on your own, or invoke the services of a specialist. Either way, commit to take action now.
3. Hire a Specialist (and Fiduciary)
Since the rules in retirement are so different, it’s important that we strongly consider the value of hiring an adviser whose specialty is retirement planning AND who is a true fiduciary. Working with a financial specialist can be important at this stage of life, just like working with health specialists can be as we get older. When we are young and healthy, turning to our family doctor was usually sufficient. However, as we age, we begin to rely more and more on various specialists for things like back, knees, heart or even cancer-related issues. The family doctor is a vital part of life, but there comes a point when our health will dictate the need for that specialist.
The same approach should apply to our retirement, especially since the strategies needed during this phase of life are vastly different, as we outlined above. Think of virtually any sport you love and the difference between the regular season and the playoffs. The regular season has many ebbs and flows that tend to work themselves out over time. But come playoff time, every game matters, every inning matters, every shot matters, and every decision matters. Games are managed with a sense of urgency … because there is no tomorrow!
Retirement is your playoffs. Find your retirement mindset so you can live your amazing retirement!
Investment Advisory Services offered through Trek Financial, LLC, (Trek) an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 21-115.
Nicholas Toman, CFP®, is a lead retirement planner and investment adviser with Empowered Financial Management (opens in new tab), a firm that specializes in retirement planning for those individuals within five to seven years of retirement or who have recently retired and no longer wish to serve as their own financial adviser. Nicholas is a graduate of the University of Wisconsin-Whitewater with a BBA in accounting and has been a Certified Financial Planner since 2014.
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