Lessons Learned: Four Important Planning Questions for Those Nearing Retirement

08/28/2017 12:38 pm ET

As a financial advisor, I work with clients of all ages on their retirement-planning needs. This relationship revolves around one extremely important goal: to help ensure that they’re prepared for a financially secure future. When it comes to mapping out a plan for those who are closing in on retirement, I find that looking to the experience of some of my retired clients can often provide some of the best guidance and direction. After all, as Albert Einstein once said, “The only mistake in life is the lesson not learned.” To be sure, even those with the best success stories have typically learned a lesson or two along the way. So, one of my favorite things to ask them is this: “What's the one thing you wish someone would have told you as you were getting closer to retirement?”

How do you plan to spend your new-found time off?

As creatures of habit, work provides us with more than just a paycheck. Other benefits might include the comfort of routine, the building of relationships or the fulfilling sense of accomplishment it provides you. But when you retire, how do you plan to replace these things? Think about a plan for how you will spend your new-found time off when it arrives. To help you get there, don’t be afraid to “test out” retirement before you do. Maybe this means taking a few days to develop a routine for your days or revisiting hobbies that you don’t have time for during your working life. Having a basic routine that you are free to modify along with the ability to explore new activities can help you prepare for these potential concerns before they become a reality.

For some, completely stopping work is not their ideal sense of retirement. Either way, talk about your plan with your spouse or partner so you are on the same page. Be sure to start thinking about what you want to do so your retirement years live up to your expectations. Shifting from your primary career mindset to a more flexible stage of life can be daunting but can also take some getting used to.

Have you thought about health care?

A recent Voya Financial survey found 77 percent of baby boomers and 75 percent of retirees have never estimated the amount of health care expenses they expect to incur throughout retirement. One thing has certainly changed over the years due to increased life expectancy and advanced medicine: Unlike previous generations, nowadays people are living longer and are being told to plan to live well into their 80s. But how do you know how long your retirement will last?

Making sure you are aware of any health issues in your family is a good place to start. Factors such as long-term care discussions, disability insurance, estate planning and preparing for the unexpected are all integral components to your plan. Life expectancy charts can tell you how long the average man or woman in the U.S. might live, but understanding the health status of family relatives — whether it’s chronic illness, long-term issues or memory impairment later in life — provides a more personalized way to financially prepare.

Do you have a retirement income plan?

The unfortunate truth today is that many Americans are not saving enough for retirement. In addition, many just don’t know whether or not they’re prepared. To be in a better position for your retirement goals, take the time now to develop an up-to-date plan that tracks your income and expenses. To get a rough understanding of where to begin, I’d recommend looking at your current cost of living and inflating that number by 3%, to the age of 70. This will give you a good estimated target. If there’s a possible shortfall in retirement, you have time to adjust and shift your plan by putting more into retirement savings or pushing back your retirement date.

It’s also important to lay out a distribution plan and understand how you are going to create income in retirement. There are many ways to determine how this will work in your retirement years — such as guaranteed income flow from annuities, risk-based systematic-withdrawal programs with mutual funds, fixed bond positions or dividend income from stocks. Be sure to find out what feels right to you. This might involve finding the right financial advisor who specializes in distribution planning and doing the proper research on the right products that will best fit your plan.

Where do you want to live?

Are you planning to relocate, downsize or stay put? Your retirement budget can look vastly different depending on the answer to that question. One practical exercise is to consider various housing options while factoring in costs. This would include items such as property taxes, closing and/or moving fees, daily living expenses, mortgage or rent payments, condo fees and home upgrades or maintenance.

How close you live to family and friends or even proximity to the activities you enjoy are also some overlooked factors. While beachfront views and golden sands might be your dream, being hours away from your immediate family might be a higher priority for you. Having access to people and things to do is a crucial factor in your decision. Ultimately, you and your partner should go into this exciting phase with as much knowledge as possible. If you think you want to move to a new location, spend time there (in all the different seasons) before you commit. Your dream destination can look good from afar, but it’s important to be sure you experience the reality of it before committing to any big decisions.

There are many other factors to consider, but asking yourself these four important questions can help pre-retirees get a jump on what it takes to make a successful transition. Of course, when it comes to the most practical and effective advice, the sooner you start saving and preparing for your future, the better — no matter where you are in your planning stages.

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