Baby boomers were never “average.” The generation wears uniqueness as a badge of honor.
However, approximately 10,000 boomers turn 65 every day. While we each have specific goals, ideas and financial circumstances, there are some things that apply to us all.
Here is some exceptional advice for both the average and extraordinary guy, gal or duo as you transition to retirement.
1. Get the Big Universal Decisions Right
As you transition to retirement, almost everyone will make a lot of critical decisions including, when to stop working, when to start Social Security, where to retire to and more.
Be thoughtful about your choices and try out different scenarios — especially if you do not have significant savings. These decisions can have a dramatic impact on your quality of life in retirement:
- Working a little longer is a triple treat: You earn more income for a longer period of time. You can save more. You can delay tapping into existing savings.
- Where will you retire? If you own a home, it could save your retirement. Consider if and how you might tap into your home equity.
- Delaying the start of Social Security can add almost $100,000 to your bottom line. Compare different Social Security start ages to figure out the best time for YOU to start to bring in the most money over your lifetime.
2. Tiptoe Into Retirement Instead of Jumping Right In
Retiring used to be a big event with parties, gifts, an abrupt end of work and the beginning of a lot of free time. However, these days more and more people are switching to retirement jobs or working part time before they quit the labor force entirely.
Other ways people tiptoe into retirement include:
- Taking a long vacation or sabbatical to recharge instead of retiring.
- Trying out (renting in or spending time at) a retirement destination, before packing up and moving.
- Making sure you can live on the budget you need to stick to in retirement.
3. Think About Passive Income
Passive income is exactly what it says it is — income that you earn without very much effort. The most popular (and perhaps profitable) form of passive income is a real estate investment.
However, you don’t necessarily have to be able to afford an apartment building to benefit from passive income.
4. If You Have Savings, Think About Your Goals and How You Are Invested
There are a lot of different philosophies about how people approaching and already in retirement should be invested. Some of the advice you hear includes:
- Your savings should be held in low-risk (and probably low-return) investments.
- Preserve your capital and live off interest.
- Think about systematic withdrawals so that your income from investments remains steady over your lifetime.
- Make sure your investments can grow to keep pace with inflation.
- Focus on income from investments, not asset growth.
The contradictory and sometimes irrelevant advice can be very confusing. The reality is that there is no one-size-fits-all all approach for retirement investments.
The best investment strategy for you will depend on the value of your assets, how much income you have from other sources, your monthly expenses, your goals for retirement, your desire for leaving an estate and more.
5. Prepare for a Long Haul and Set Up a Long-Term Budget
Retirement can be a long endeavor. If you retire at 65, you could easily spend 30 years enjoying life.
When you retire, you are agreeing to live off relatively fixed finances. As such, you really need to know how much you are going to spend and when.
You will want to think about how your spending levels might change over time. Most people spend a little more when they first retire. Then, less as they get a little older. And finally more — mainly on health care — near the end of life.
When thinking about your retirement budget, you also want to include any big one time expenses you might incur for things like education or travel.
6. Consolidate and Simplify Accounts
If you have not already done so, the transition to retirement is a good time to consolidate your savings and banking accounts to simplify your money management.
Too many people enter retirement with old 401(k)s and IRAs. Having multiple accounts can be difficult to manage and it may increase the fees you are paying.
A few tips for consolidating your accounts:
- Ask a lot of questions about fees.
- Consider your investment options.
- Do rollovers VERY carefully to avoid withdrawal penalties.
7. Think About Friends and Family
With so much to think about as you transition to retirement, sometimes the most important parts of life like friends and family can get a little lost.
Social connections are one of the most important factors for your emotional and even physical health. And many people really miss daily interactions with people when they stop working.
As you think through your retirement plans, be sure to factor in your loved ones.
- Will your retirement-lifestyle decisions enable you to maintain your friendships?
- Do you have a plan for seeing people on a regular basis?
- If you are relocating, how will that impact your relationships?
- Will your children need or want financial support?
- Will they contribute to your retirement finances or long-term care?
8. Start a Retirement Club
Have you ever benefited from networking for work? What about when you first had kids? Weren’t things a lot easier when you had other parents to talk with about diapers and being up in the middle of the night?
Wouldn’t it be nice to be able to chat and commiserate and brainstorm about retirement with your friends?
If this sounds appealing, maybe you could set up a retirement club — kind of like a book club, but you discuss retirement topics instead of the latest bestseller. Possible themes for each meeting could include:
- Around-the-room sharing about what is good about your retirement plan and where you could use some help.
- Bringing in an investment advisor to talk about your options.
- Discussing different Social Security options.
- Sharing retirement articles in advance of meetings and discussing what you read.
Research into financial literacy has found that your peers can have a huge impact on your success. In the same way having a workout buddy gets you exercising more, discussing finances with friends can be motivating.
9. Write or Update Your Estate Plans
Did you know that you need more than just a will? The will is important, but probably of bigger consequence to your own well-being are your medical directives.
What are your plans for a catastrophic medical event? What do you want to happen if you need some kind of long-term care?
Consider the different estate planning documents you should have on hand.
10. Don’t Be Afraid to Have Fun and Be Happy
There is a lot to worry about as you transition to retirement.
Research from Merrill Lynch, “Leisure in Retirement, Beyond the Bucket List,” finds that most people have anxiety leading up to retirement, but find that once they take the plunge, they are very happy.
If you are worried about finances, dig deep and prioritize what is important to you. Keep your focus on your priorities and make sure you can do those things.
Just make sure that you are enjoying your time now, not only looking forward to the future.
11. Plan for How You Will Spend Your Time
Many people focus on the financial aspects of transitioning to retirement. However, it is really important for you to plan your retirement lifestyle. Retire to something, not just away from work.
Here are a few ways to find what to do in retirement or afford the most popular retirement activities:
- Ideas for what to do in retirement
- Retirement travel ideas, including tips for for retirement travel on a budget.
- If you are worried about paying for rounds of golf, maybe work part time at the course to subsidize your hobby.
- Want to see the grandkids more? Can you move closer?
Still worried? Studies find that having a retirement plan helps alleviate the stress.
