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Five keys to successful preparation for retirement

May 25, 2021
  1. Plan your retirement date

According to U.S. Census Bureau data, the average retirement age for men is 65 and for women 63. Even though it is hard to determine the exact desired retirement date, it is good to plan for a specific age since many decisions will depend on it. For example, suppose you prefer to call it quits at 55. In that case, you will have to plan for healthcare coverage, and you will not be able to access your retirement accounts without a penalty, with some exceptions. Therefore, you should plan to have sufficient savings in taxable accounts since you will not be eligible to receive even reduced Social Security yet.

On the other hand, if you decide to retire at 62, you can start taking Social Security. Depending on your full retirement age, your check can be reduced by as much as 30%, and you are still not eligible for Medicare coverage. Healthcare coverage is one of the main reasons most people decide to work until 65, when they qualify for Medicare. Furthermore, waiting until Full Retirement Age gives a nice boost to your Social Security check. 

Now that you considered all pros and cons of retiring early or waiting until at least the age of 65, it is time to start thinking about how you will enjoy the fruits of your labor. 

  1. Come up with your goals, wants, and wishes.

It seems that this would be the easy part of your retirement planning, but many pre-retirees struggle to imagine how they will fill up their days. While we are pretty good at planning and dreaming about our future when we are young, by the time we get closer to retirement, we mostly come up with a single goal to have a sum of money each year to pay the bills. Business coach Dan Sullivan suggests: "Always make your future bigger than your past." Imagine how you will spend your time. Maybe you want to help raise your grandchildren or volunteer, or perhaps visit countries you always wanted to see, or maybe you have your heart set on writing a novel. Possibilities are endless. 

  1. Get a portfolio check-Up.

While saving enough and growing your portfolio was the most critical part of your accumulation phase, you should start thinking about the next, utterly different phase-decumulation, in anticipation of retirement. A portfolio that worked perfectly while you were years away from retirement will need a complete makeover to ensure that your money lasts for as long as you do. One colossal risk which did not affect your portfolio before will be a sequence of returns risk, and you need a plan to manage it. 

  1. Come up with a budget. 

It is a great idea to start tracking where your money is going if you have not done that yet. If you start paying attention to your spending habits, it will be much easier to develop a realistic budget for your retirement. We also recommend, if possible, to test the new budget that you come up with while you are still working. 


  1. Build retirement income stream 

In the past, retirement income planning was quite simple. Most retirees had Social Security and generous pensions to cover essential needs. Savings were mostly used to meet extraordinary expenses. Today, most retirees have only two sources: Social Security and investment accounts such as 401(K), IRAs, etc. Therefore, today it is more important than ever to make correct claiming decisions and maximize the value of Social Security payments since it will protect you against the longevity risk. 

Once you have a good idea of what portion of your expenses will be covered by a Social Security check, you can determine how much income you will need from your savings. You should consider other income sources such as pensions, home equity, life insurance policies, rental, or business income as well. In addition, you might consider working on a part-time basis in retirement not only for financial reasons but also to keep engaged socially and mentally. 


While risks and roadblocks to a successful retirement abound, a well-defined retirement plan can help you to reduce those risks and enjoy many years to come. 

If you would like to plan for your retirement, please click on the link below to schedule a complimentary call. 


Please click on this link and select option one, 15 Minute Meeting