Planning for Retirement

From the day we start working, dreams of retirement are common, but few start planning for it on that day. For most, putting together a plan for retirement is often pushed aside – we’re too busy, it’s too far away, as long as we invest we’ll be fine. Retirement planning is more important than many realize and there’s a lot more involved in it than just the finances.

Having enough money is key when planning for retirement but many people fail to think about what life might be like once they aren’t tied to a job. While some sail smoothly into it, others embark on an emotional rollercoaster of boredom and loneliness as your role and your relationships with others change. Employment provides an income and a purpose and when that’s gone, we need to re-evaluate our roles.

Retirement used to mean sitting on your porch and watching the world go by, but today it’s just the beginning of the next phase of your life. Retired people start new careers, travel and enjoy better health than ever before.

The best way to start planning for retirement is to make a list of interests and goals. What have you always wanted to do, but never had the time? If you have a spouse, go through the list with them and look at ways to combine your list with ideas they may have. Try to be as uncensored as possible. It’s sometimes easier to make the list without factoring in expense – six months in Italy may seem impossible now, but there are ways to make it practical and affordable.

With your list in hand, now consider the practicality of what you hope to do in retirement. The following steps will help you put together a plan that makes sense.

Stepping towards retirement

1. Retirement is more than the day you stop working

   You’re starting fresh, leaving most of what you were before behind you. The day you graduate high school, you cease to be a senior who goes to XYZ School. You need to create a new identify out in the world. Retirement is the same – you’ll find yourself saying, I used to be an accountant at…

   The day you retire is the beginning of the next part of your life. Plan well and it will be the best day ever.

2. Look at the work you do today and figure out how to retire tomorrow

   You like your job, a lot maybe, but if you could stop working early, would you? Answering this question will help you decide what age you plan to retire. If you want to retire early, you’ll need to make some financial sacrifices to get there. Don’t forget to check your employee handbook for a description of the plan available to you and when you become eligible to participate.

3. Risks pay off - now and in retirement

   When it comes to investing, you shouldn’t stop taking chances the day you retire. Market risk and reward go hand-in-hand and change over time. The chance that your investments will all be on an up-swing the day you retire are slim, so get comfortable with a some calculated risk. The potential return may be worth it. Consider setting a limit to the amount that you can invest in higher risk endeavors. If you lost the money it would sting, but wouldn’t force you to make any lifestyle changes as a result.

4. Retirement can be the start of a new career

   It is recommended that you have 60% + of your gross household income per year to sustain the same lifestyle after you retire. For some, that will come from a combination of pension and investments. Other may want to work in a different or reduced capacity, like semi-retirement or consulting. Your company may be willing to work with you on an arrangement that is mutually beneficial or you may venture out on your own with a new business endeavor.

5. Recognize that your home is an asset

   You will still need a place to live when you retire and hopefully you have either paid off or almost paid off your mortgage. But your home is more than four walls and a roof – it’s money in the bank. A house, especially when it's paid for, represents security in the form of an asset from which you can obtain needed capital.

6. Don’t forget the small stuff!

   Little things like medical coverage and life insurance shouldn’t be forgotten.

   As we get older we rely more on these than we did during our careers, so be sure to look into long-term coverage.