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Make the Retirement Planning Reality Check Work for You

Advice from the author of 'Retirement Game-Changers'


(The following excerpt is from Retirement Game-Changers: Strategies for a Healthy, Financially Secure, and Fulfilling Long Life, by Steve Vernon. Published by Rest-of-Life Communications. Copyright © 2018. All rights reserved. The book is available at online booksellers and some bookstores.)

Do you have enough money saved up to retire when you plan to? Many people think they do but haven’t actually done the math. In fact, as an actuary and retirement adviser, I’ve seen too many people in their 50s and 60s shy away from assessing their retirement resources, either because they don’t know how or are too scared to face their reality.

Then something happens, and they end up retiring sooner than they’d expected to — either because they get laid off, poor health forces them to stop working or they experience a frustrating “I’m outta here” incident at work and retire impulsively. Years later, when money gets tight, they regret that earlier decision to avoid planning their retirement.

The Retirement Delusion

Don’t be a victim of retirement delusion! By finding out when it’s actually realistic for you to retire, you’ll enjoy a more secure rest-of-life.

retirement game-changersYou have a new “retirement job” —spending the necessary time to plan for a long retirement. To help you do it right, the following Retirement Reality Check I’ve created puts together all the retirement action steps described in my book, Retirement Game-Changers, and gives you a checklist to track your progress.

You start by laying the basic foundation to attain financial security in your retirement years. Then you build on this foundation by taking steps to further enhance your finances, improve your health and nurture your social network. And you finish by planning for the best possible life in retirement and preparing for your final years.

I highly recommend you complete the Retirement Reality Check in your late 50s or early 60s. Think of age 60 as the milestone age for assessing your retirement situation, much like the medical tests you’re supposed to take at age 50. Don’t worry if you’re older than 60 now, though — it’s never too late to take charge of your life.

As a minimum goal, you’ll want to assess the resources you have that will help you build a financial foundation for your retirement years. Simply put, if you haven’t completed these tasks yet, you’re not ready to retire.

5 Steps to Get Started

Here are five steps to ensure you’re not winging it with your retirement planning:

1. Take inventory of all your financial assets.

2. Estimate the total of your retirement paychecks and bonuses from all sources: Social Security; a pension if you have one; work; investment income and payouts from your savings. Be sure to distinguish between:

  • Secure “paychecks” that will last for the rest of your life, such as Social Security, pensions, and annuities, and
  • Variable “bonuses” that can fluctuate in amount or might not last for life, such as earnings from work or withdrawals from invested assets.

3. Complete a budget for your living expenses that includes housing, transportation, food, utilities, medical expenses and taxes. Be sure to distinguish between basic living expenses and discretionary expenditures. Then estimate how these numbers might change in your retirement years.

4. Know where you’ll be obtaining health and dental insurance, and how much it will cost both before and after eligibility for Medicare at age 65. Also, guesstimate how much money you might spend out-of-pocket for medical expenses, including copayments, deductibles and coinsurance. Many people are surprised to learn that out-of-pocket costs for medical insurance premiums, deductibles and copayments increase substantially when they leave their career job.

5. Estimate how you’ll address the magic formula for retirement income security (Income > Expenses), both in the immediate future and for the rest of your life. Make sure the formula will work for your spouse or partner, if applicable, after you’re gone.

Beyond the Money Basics

Now, let’s move beyond the money basics of retirement to see how you can enhance your retirement planning:

Line up encore/downshifting work or volunteering or explore your work or volunteer opportunities. Take inventory of your relevant work skills and experience.

Eliminate ongoing credit card debt and student debt, if applicable. Or work out a schedule to pay off these debts. Be sure to include these costs in your budget for living expenses. Plan to pay off your mortgage at some point before or during your retirement years.

Identify professionals who have the skills to help you with your finances and health and who have your best interests at heart.

Know your basic health indicators and measures. Make sure you’re satisfied with the steps you’re taking to improve these numbers and your health with your nutrition, exercise and lifestyle habits. If you have specific health conditions, develop a plan to manage or improve them. If you haven’t yet taken these steps, identify a path for improvement.

If you have a spouse or partner, make sure you have or plan to create a diversified portfolio of social engagements beyond the activities you do with him or her. Then take steps to nurture them.

Final Steps for Retirement Planning

Next, take the following steps so you can feel good that you’re leaving no stone unturned when planning for your retirement years:

Get on good terms with your spouse or partner, if you have one, and your close family and friends. Make sure you have no unfinished business with them. If you do, commit to a plan for making amends.

Develop hobbies and interests that you’ll look forward to on a daily or weekly basis, if you haven’t already. By doing so, you’ll find that you can fill most of your days with meaningful activities, beyond the “vacation” aspects of retirement.

Give serious thought to where you’ll live in your retirement years, both the community and the specific home. Make conscious choices about one or more of the following goals:

Relocating, perhaps to be near family, work or activities or to reduce living expenses. This might be downsizing or making improvements to your new home to age in place

Create a strategy to address the possibility of needing long-term care. This should include financial, health and social strategies.

Plan the legacy you’ll leave. It can be strictly financial or can be a matter of passing along values that are important to you.

It’s a lot of work to put these steps into place, but it’s well worth the effort to make the best of the years you have left. And be sure to celebrate as you check off the tasks, knowing that you’re on your way to a better life for a long retirement.

Steve Vernon, F.S.A.
By Steve Vernon, F.S.A.
Steve Vernon, F.S.A., is a consulting research scholar at the Stanford Center on Longevity and president of Rest-of-Life Communications, where he delivers retirement planning workshops. Vernon writes the Money for Life blog for CBS MoneyWatch and is author of Retirement Game-Changers and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.

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