Understanding Your Retirement Readiness
Being ready for retirement is about so much more than hitting a certain retirement age. Here we look at three areas that you should consider when determining whether you’re in a position to retire.
Approaching retirement comes with so many questions. Will you have enough money? Will you be able to accomplish what you’d like to do with the money you have? Will you be satisfied with retirement life?
While it’s true that success in your retirement years is due in large part to finances, there are other factors to consider, as well. As you assess your retirement readiness, you’ll also want to be mentally, emotionally, and physically prepared for those golden years.
Financial readiness
You’ve socked away as much as possible in a 401(k) plan or other retirement account, because you know that one of the best things you can do during your working years is to save for retirement. But even if you’ve followed the advice to save as much as possible and start as early as possible, you still may not have a picture of just how much you need to retire comfortably.
In fact, most Americans underestimate how much money they will need in retirement to support the lifestyle they wish to have. And it can be tough to plan ahead and factor in all the variables that come into play when you’re working toward retirement. These might include:
- your expected lifespan and total years you’ll spend in retirement;
- your tax burden at different stages;
- your wishes for your family or other legacy wishes;
- whether or not you own a business;
- the impact social security, a pension, and other benefits will have on your retirement income, and so on.
Determining financial readiness can come with the help of a wealth advisor. It all starts as far in advance of your retirement as possible, with a comprehensive financial plan. We help our clients create a plan based on phase of life, goals, and more. From there, we can help you create a retirement plan with the right mix of investments to help you ensure your finances will be ready when you’re ready to retire.
Mental and emotional readiness
For many, their career is synonymous with their identity, or at least a very integral part of who they feel they are and how they contribute to the world. Sure, you may also be a parent, grandparent, or friend, but we also attach a great deal of value to the role that absorbs the most of our waking hours: Our jobs.
Retirement may seem like shangri-la, especially after nearly 50 years of an 8-to-5 grind, but more and more men and women are facing psychological difficulties and feelings of disorientation in their retirement years: from mild boredom and restlessness on one end of the scale, to full-blown anxiety, depression, and insomnia on the other.
That means it can be every bit as important to plan out aspects of your retirement life beyond your finances. Consider how you will spend your time and how you will stay engaged with both intellectual pursuits and with people, including former colleagues and friends of all ages (not just the grandkids). Plan ways that you can continue to use the skills and knowledge you attained during your working years, such as through mentoring, teaching, or writing.
Physical readiness
Entering retirement feeling healthy and fit can be another afterthought for people in their working years. So many people favor financial fitness over anything else, and that can have some negative consequences in retirement—consequences of both the physical and the financial kind.
Strapped to a desk or conference room and wishing you could spend more time on the links or in the gym? Need to eat better or quit smoking, but keep procrastinating those important life changes? Before retirement (ahem, now) is the time to commit to better health, for a number of compelling reasons, including the fact that poor health in retirement can cause you to spend a lot more on health and medical expenses.
The old advice about preparing financially for retirement holds here, as well: It’s not too late to start. Start today by creating new health habits that will help minimize what you will have to spend on medical care in retirement. And while you’re at it, don’t forget to plan financially for rising healthcare costs (including long-term care costs) in retirement.
