by Matthew McIntyre, founder and the CEO of Peak American Financial Companies
When retirement looms on the horizon, it’s natural to have feelings of eager anticipation mixed with a smidgen of angst.
Retirement sounds great in theory, and looks even greater in many TV commercials, but are you really financially, emotionally and physically ready for it?
Ultimately, only you can answer in the affirmative or the negative, but here are five questions to ponder before you make your decision:
1. Have you and your spouse discussed roles around the house?
Maybe throughout your marriage you headed to one office each morning and your spouse drove off to another. Or perhaps one of you spent time at home caring for the children while the other trudged off to work. Regardless, unless you ran a family business together, the odds are high that you spent 40 hours or more each week away from each other. Retirement likely will throw you together more often than you are accustomed to and with plenty of time on your hands, so before you get there, have a conversation about your new roles. How will you split household chores? What if one of you wants to pencil in endless activities on the calendar while the other prefers to stay home and read or watch TV? Now is the time to discuss what life will be like in your household under this new reality.
2. Have you developed a written income plan?
Financial professionals used to talk about a three-legged stool that propped up retirement. Those three legs were pensions, Social Security and savings. The stool has gone wobbly as, with each passing year, fewer people can depend on pensions. That leaves Social Security and savings as the primary sources of retirement income for many people. Figure out how much you need to meet your expenses each month and determine whether that combination of Social Security, savings, and any other income source you might have will cover your anticipated spending. Don’t forget to factor in taxes and inflation. If you come up short, you might want to consider delaying retirement until the numbers align better in your favor.
3. Have you gotten a complete physical?
Perhaps you’re financially and emotionally ready for retirement, but what about your physical health? Most people want to be active to one degree or another when they retire, perhaps traveling, playing tennis or golf, or at least taking regular walks around the neighborhood and playing with grandchildren in the backyard. You don’t want to plunge into retirement only to learn about an underlying health condition that could sap your joy and that could have been taken care of sooner. Good health is important in retirement for a number of reasons. Beyond the fact you want to stay active and feel good each day, healthcare costs can add up and drain your savings when you have significant problems. Scheduling a complete physical with your physician as part of your retirement preparation can help you head off potential trouble and feel more confident as you enter this stage of your life.
4. Have you looked at how to maximize your Social Security benefits?
Social Security benefits represent, on average, about 33% of the income for those 65 and over. For many retirees it’s much more than that, with in some instances Social Security accounting for 90% or more of their income. That’s why it’s important to make sure you get every penny that’s coming to you. For example, you can claim Social Security benefits as early as age 62, but it will cost you. You receive a reduced monthly benefit when you claim Social Security before your full retirement age, which for most people these days is between 66 to 67. And that reduction, which can be as much as 30%, is for life. On the other hand, delay claiming your benefits past your full retirement age and you can increase your benefit 8% a year up until you reach age 70. There are other ways to maximize benefits as well. Just one example: Benefits are calculated based on your 35 highest earning years. If you worked fewer than 35 years, zeros are factored in, so it could be wise to postpone retiring if you’re short of those 35 years.
5. Have you met with a Financial Adviser who specializes in retirees?
You can go it alone when it comes to retirement planning, but that’s not advisable. A good financial professional can help you make sure your finances are on track and can also provide advice on a multitude of retirement concerns or strategies you may not even have thought about. Some financial planners specialize in helping you accumulate money, which is fine when you’re in your 30s, 40s and perhaps into your 50s. But as you near retirement the focus changes from accumulation to preservation and the strategies are different. Make sure you work with a financial professional who has a track record with retirees and can help you stretch out your dollars over a retirement that could last two or three decades.
Plenty of factors can come into play as you decide whether you are financially, emotionally and physically ready to retire. But if you weigh those factors carefully, you will increase the odds that when you do retire, you will have chosen the time that is right for you.
Matthew McIntyre is the founder and the Chief Executive Officer of Peak American Financial Companies. He is a registered Investment Advisor Representative and has had a successful career in helping people with their retirement and financial needs for more than 30 years.