Whether you are 26 or 56, if you clicked on this article it probably means you are at some stage of retirement planning.
As you read the title, you might have thought: “Hmm. I’m pretty sure I’ve thought through everything for my retirement plan. Let me think through my list:
- How much money should I be saving monthly? Check.
- When can I retire? Check.
- How much money will I have when I retire? Check.”
Well dear reader…you’ve got most of your bases covered. However there is one small piece that many people don’t consider when developing their retirement plan. The missing piece is: Their retirement plan! While numbers and projections and calculations and spreadsheets are critical for sure, they are meaningless without actually thinking about what you plan to do DURING retirement. Often times clients come to me, well prepared with their 401k statements, monthly deposit amounts, investments, etc…but when I ask them “what are your plans during retirement?” they are stumped. There are two reasons why thinking through the final years of your life are crucial:
- How can you possibly know how much money you will need for retirement if you don’t know what you will be doing? If you plan to live in a tent during your golden years, you will need far less money than someone who wants to split their time between a Manhattan and Paris penthouse.
- What are you going to do? I know what you’re envisioning…because we all envision it. Finally, after all these years of working, you did it! You hit the magic age of 67 and retire. It’s glorious. You wake up on your first morning of official retirement and…well, what do you do? Sure, initially having no responsibilities or plans sounds fantastic. But how much can you really tend to your garden or catch up on reading? People…retirement can be a looong road. We’re talking up to 30+ years! That’s a lot of life left to live. Often retirees feel bored, lonely or depressed during their later years because they don’t have the routine, social interaction or purpose that work provided.
So before you start crunching the numbers, ask yourself these questions first:
- Where will I live? If I move, will I be in a more (or less) expensive home or city?
- What are my dreams and goals in retirement? What’s most important to me? Will I need money for travel, buying a boat or to finally get my pilots license? Or do I want to have the flexibility to move closer to my children.
- Do I want to help my children financially?
- Health costs typically increase in retirement. Do I have family that can help me? Will I need to consider a retirement home?
- Will I want to work? Even if you don’t need the income, doing something like part-time work, investing in a project, or writing a book can provide a sense of purpose.
- Do I want to leave an estate to my children (or charity, etc)?
Again, I don’t want to discourage anyone from running the numbers. If you have thought through how much money you have and how much money you’ll need, you are ahead of the game. But as you are planning for retirement, just remember to take a pause and think about exactly what you are planning for.
Liz Frazier Peck is a Fee-Only, Certified Financial Planner specializing in financial planning for families and working professionals. In addition to her CFP, she holds an MBA from Wake Forest University and am a member of the National Association of Personal Financial Advisors (NAPFA). Our family’s firm, Frazier Financial Consultants, has been providing money management and financial planning since 1986.
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