As you might expect, it is quite common for people to visit us at Moneywatch as they are in their 50’s and 60’s and can, maybe for the first time, actually envision a time when they will be retired. Although they, correctly, have a myriad of financial questions that I will describe later, the question WE ask THEM is – What’s your grand plan? Meaning, you have plenty of life left, how do you plan on living it?
We ask that question for two reasons:
1) Transitioning to retirement can be psychologically and emotionally difficult and we want to make sure our clients have thought this through. That may sound hilarious to someone in their 30’s working 10 hours a day and longing for some time off but work is important: it helps provide purpose to our lives, it proves to us that we’re needed and it gives us someplace to go each morning and have meaningful interactions with our peers. For some people, losing all of that overnight is like hitting a brick wall. So, we help our clients think through their transition even before we create a financial plan that will allow them to enjoy their remaining working years knowing what their options are.
2) As you might expect, your financial plan must support whatever personal plans you’ve made. For instance, if you want to sell your house and buy a boat to sail around the world, you must be able to financially make that happen. (We’re still waiting for someone to bring us that grand plan, by the way) More conventionally, if you plan not to work at all, can you afford it?
Here are some common financial questions we hear from clients:
• How much do I need to retire?
Simply put, a financial plan will help you determine what amount of savings – in your work retirement plan plus any other investments – you need to have to cover your expenses from retirement through the rest of your life. A plan will help answer this question. For a rough estimate, if you took 5% of your savings each year for income, would it cover your expenses?
• Am I invested properly for this stage of my life?
The glide path into retirement is an important one as we try to balance the dual needs of continued growth with the preservation of your investment assets. So, we often manage the investments of clients within a few years of retirement much differently than younger clients. No one wants to have to delay their plans because they weren’t prepared for a downturn in the stock market right before their retirement party.
• How do I turn my savings into income at the right time?
Transitioning properly from being a “saver” into being a “spender” can be an emotional one but, more important, requires a plan to convert those savings to income when you need it. We determine which accounts – work retirement account, IRA, Roth IRA, taxable investment account – as well as which investments within those accounts to draw from. And we work to minimize tax consequences at the same time.
• When should I take Social Security?
Your overall financial plan will consider when you will need income, your current health and other factors to help determine the best age at which to start taking Social Security to maximize the amount you will receive through the rest of your life.
• How can I best support my favorite charity?
It’s a lot more fulfilling to see the impact of your largesse on your favorite charity when you are still living, right? Your financial plan will help you determine how much to support your cause now and possibly how much to include for them in your estate when you’re gone. Proper estate planning, as we help you partner with an attorney who specializes in wills and trusts, can be an important – and fun – part of your retirement plan.
The approach to retirement can be terribly exciting and daunting all at the same time. We seek to provide peace of mind so our clients can enjoy their remaining working years knowing what their options are. If they want to quit their job to pursue other passions, they can do it with confidence. They will know how much income they can comfortably take, and how much money they can give away if they want to.