5 Things You Need to Decide Before You Can Retire
You’ve got to think these things through and make sure all your bases are covered before you can finally call it quits and retire.
![](https://cdn.mos.cms.futurecdn.net/6HshYzbtLYHJgCBiTTM8Yh-415-80.jpg)
In the world we are living in right now, some people have been forced into early retirement, as many businesses have suffered as a result of the COVID-19 pandemic. For others, this early departure was part of their normal plan.
To help those about to retire, here are five things they need to have in place before doing so.
Disclaimer
Securities and Advisory Services offered through Cadaret, Grant & Co., Inc., a Registered Investment Adviser and Member FINRA/SIPC. HMS Financial Group and Cadaret, Grant & Co., Inc. are separate entities.
![1. A vision for their retirement](https://cdn.mos.cms.futurecdn.net/z2ZVRCu4eEfmX2MnxmCJhj-415-80.jpg)
1. A vision for their retirement
It can be quite depressing when individuals retire without knowing what they are going to do. They can become extremely bored and feel unfulfilled. In severe situations it can lead to depression and other emotional troubles. So, in tandem with figuring out the financial aspects of retirement, people should have a plan in place. Obviously, nothing is set in stone, and they may ultimately end up enjoying a lifestyle they never envisioned.
Pre-retirees often dream and question: What am I going to do in retirement? Am I going to volunteer? Will I travel? Will I be active with hobbies and sports? Will I be more social? Answering these questions and others like them will help them prepare.
Of course, sometimes we “do not know what we do not know.” However, other times we can have an idea. The end of a career is much like the beginning in that we don’t know where it will take us. When it comes to retirement planning, it helps to start with a vision of what retirement might look like, so expense estimates can be calculated.
A realistic assessment of what you will need and what you can save is crucial, because the answers will help a pre-retiree structure a plan that is both attainable and satisfying. We all dream, but being realistic will give you a higher level of confidence that you have saved enough to partially or fully retire. It also helps answer the question of when to retire.
![2. A budget](https://cdn.mos.cms.futurecdn.net/otNwRfFsDbVUyDXmJSvvXP-415-80.jpg)
2. A budget
Numerous statistics show that a majority of Americans do not know what they need to have saved to maintain their lifestyle in their retirement years.
Anyone considering retirement should have a sense of what they spend now and what they will spend in retirement. With more free time, it is easier to have increased expenses. Plus, inflation will likely increase expenses with each year lived in retirement. In other words, what you have saved today will likely not go as far tomorrow.
We see health care costs skyrocketing. This is a trend that does not seem to have an end. On top of that, longevity is improving. (To estimate how long you may live, there are Life Expectancy calculators available online.) As we live longer, we have more years to spend. Plus, we might have more needs, and costs in those later years will likely further increase.
Debt and other liabilities also factor into the equation. Therefore, an encompassing look is needed to properly make informed decisions.
It helps to work with a professional financial planner to evaluate these factors and others that go into creating a dependable budget. If you do, it will make it feasible to make better decisions.
![3. An income strategy](https://cdn.mos.cms.futurecdn.net/D6S68o5ycGPAHF3ffqoafU-415-80.jpg)
3. An income strategy
Most people know that they probably should get more conservative with their investment approach as they get closer to retirement, but what does that mean? Retirement income needs to provide for a comfortable lifestyle, but in a low-interest environment, it becomes more challenging to limit risk, while also having a steady flow of money to spend.
Many questions can arise about when to withdraw investments, how much to withdraw, and where to withdraw the money from. For example, there can be tax advantages in waiting to withdraw money from taxable accounts, such as IRAs and 401(k)s, but there are also required distributions that must be made at certain ages. For many reasons, there are also benefits in picking the right taxable or non-taxable accounts to sell from, when needed. Portfolios including non-retirement accounts, 401(k), 403(b), IRAs and pension plans all should be reviewed, along with certain forms of insurance to determine if they should be changed from growth to income-producing vehicles.
![4. A firm grasp on government programs](https://cdn.mos.cms.futurecdn.net/oCfWznx7yXZoBYTFPtkFVj-415-80.jpg)
4. A firm grasp on government programs
Know how to take advantage of Medicare, Social Security and any other support you qualify for.
For example, Social Security can be tricky. Everyone’s situation is unique. Have you lost a spouse? Lost a spouse with minor children? Divorced? Been married for over 10 years, then divorced and remarried? Each situation is unique and treated differently.
My suggestion is that you make an appointment with the manager of your local Social Security office to explain your available options. They can’t advise you on what your best option may be, but they can answer your questions about the various choices.
Also, with the help of a professional understand the laws and how they directly impact both your financial plan and estate plan.
![5. A legacy plan](https://cdn.mos.cms.futurecdn.net/BHtoHeJg5HKWcqUQakZ3mZ-415-80.jpg)
5. A legacy plan
If you have a sense your wealth will outlive you, you should have a legacy plan. Legacy planning may include preparing a will, trust, power of attorney and health care proxy. Many people will consult with an estate planning attorney in conjunction with their financial planner to help them draw up the appropriate documents for their needs. With the proper documentations, your heirs can avoid probate court and be prepared for what their inheritance is intended for.
It isn’t just about preparing the money for your heirs. It is probably even more important to prepare the heirs for the money they will inherit.
Some people also want to help make the world a better place by supporting a nonprofit with a gift after dying. All of these considerations should be reviewed before retirement.
Need help finding a financial planner to help you plan your retirement? One suggestion would be to go to your local Financial Planning Association chapter website. There you can do a search to see who could best help you.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Barbara Shapiro is the President of HMS Financial Group located in Dedham, Mass. She is a CFP®, Certified Divorce Financial Analyst and a Financial Transitionist®. She is also co-author of "He Said: She Said: A Practical Guide to Finance and Money During Divorce." Her firm specializes in comprehensive financial planning with a subspecialty in divorce that assists clients' transition from marriage to independence with peace of mind and confidence. Learn more at HMS-Financial.com.
-
Stock Market Today: Dow Outperforms After IBM Earnings
Investors also parsed a strong reading on second-quarter GDP and a dismal decline in durable goods.
By Karee Venema Published
-
Try the 6 to 1 Grocery Shopping Method to Save Time and Money
The 6 to 1 Grocery Method can help you save money, reduce waste and eat healthier.
By Erin Bendig Published
-
If You're the Millionaire Next Door, You May Be a Terrible Spender
Good job on all that great saving. Now you need to start spending some of that hard-earned retirement savings on the things you love.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
Who Will Be the Beneficiaries of Your Wealth?
Deciding who you want to inherit your wealth, as well as when and how, is a crucial first step in estate planning. Here are the four beneficiaries to keep in mind.
By Adam Frank Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published