01/28/2015 03:51 pm ET Updated Mar 30, 2015

4 Key Variables of the Retirement Equation

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There are many things to consider when contemplating retirement. It is one of life's sea changes and if not carefully considered, there can be many surprising outcomes. One such result might be that the retiree decides to return to work. Another could be that major lifestyle changes are needed to live within a much tighter budget.

Perhaps it is because of this complexity that 62 percent of couples disagree about retirement age, according to a story in The Wall Street Journal, which quoted a study by Fidelity Investments.

Thinking about and planning for retirement is fraught with emotion, and this emotion can get in the way of rational decision-making. I call it an emotional root canal. Below are four key considerations for retirement. Reaching a resolution on these four considerations is, I believe, the key to a happy and secure retirement.

Where are we going to live and what do we like to do?

Baby boomers are active retirees and should pick a locale that suits their preferences and their lifestyles. If time with the grandkids is the overriding activity, this will require living near them. In fact, living with children and grandchildren should be considered as it ensures much contact time and could dramatically lower housing costs.

Alternatively, if retirement is the time to finally hone the golf game, then a warm weather residence will make the most sense. Both isolation and access to medical care are always a concern in retirement, so an urban environment where human connections and resources are abundant may be a better fit than living in the country. Nailing the ideal location to live is critical to good decision-making overall on retirement.

Where is our retirement money and is it safe?

When contemplating retirement, you need to understand fully what income and assets you will draw upon. Income will generally be in the form of pensions, social security, or an annuity, while assets will include savings, securities such as stocks and bonds, 401(k) funds, and other retirement plans. Assets should only be invested in very conservative, lower risk securities.

Retirement is not the time for an aggressive investment posture. That having been said, all securities are inherently risky, and the only way to avoid that risk altogether is to use a bank, a guaranteed annuity, or other insured account.

How much money will I need in retirement?

The first step in determining how much money will be needed in retirement is to develop a budget. When doing so, determine the necessities and the niceties. The niceties may need to be scaled back to fit more limited retirement resources.

When building your budget, be sure to build in an annual inflation factor - there are online tools for this - and to include a line item for health care costs, which will also increase as you age. If you plan to travel more, then budget in that expense, because as we all know traveling is not cheap.

Will I be bored?

Some people embark upon retirement and ask themselves why they waited so long. It is a time to define life on your own terms and do the things you truly enjoy. Others lose a sense of identity that becomes very hard to replace. Those who have been in one job or with one employer for many years may have more of a challenge.

The key is to not wait until retirement to form new interests and make new friends. Start doing things now that will allow you to establish friendships and build new interests. Mountains of gerontology research demonstrate that social connections and human contact play a pivotal role in overall health and well-being. In our technologically advanced era, it is easier than ever to hunker down with a computer and shut others out. While it is important to be technologically proficient in retirement, look for opportunities to spend time with real - not virtual - friends and acquaintances.

Volunteering is another way to make those connections and to give something back to a world that has nourished you.

Retirement is an important decision so make sure that you have thought through the variables before handing the letter to your employer or selling your practice. At the same time, like most things in life, it can be undone if you change your mind. After all, Michael Jordan, Barbara Walters, and Sean Connery have all successfully done so.

Barry Koslow, JD, is president and CEO of MKA Executive Planners, a Massachusetts-based executive benefit and retirement planning firm. He can be reached at

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