As my mom said to me during her first few months of retirement, “Retirement is a lot of work!”
One of the most challenging and exciting life transitions is the shift from working years to retirement, but there are a lot of elements that need to be considered in the process. Retirement planning really begins with your first 401k contribution as early as your first job, but the 3-5 years before retirement and the first few years of retirement are when the focus is even more critical.
Here’s a brief overview of the issues you should be considering:
- Options for transitioning from work to retirement
Do you have to go cold turkey or can you slowly reduce the number of hours or days that you work allowing you to get a feel for the emotional and lifestyle impact of the change?
- Managing your debt
Too much debt can be uncomfortable in retirement, though it might still be financially beneficial. Getting access to credit once you retire is much more difficult.
- Company benefits
You should review any benefits that carry over into retirement such as life or health insurance, options for receiving any pensions, and ways to handle your 401k or other retirement plans. A concentrated position in company stock can also have risk and tax implications. Additionally, small business owners should be thinking about planning around ownership succession for the business.
- Social Security
When is the best time to begin and how does your spouse’s Social Security decisions impact your own?
- Replacing your paycheck
How will you generate the ‘income’ you need and how much can your investments and other income sources comfortably generate on an annual basis (and don’t forget to factor in inflation)? What tax and risk implications are there among your various assets and income sources? Will you be in a lower tax bracket for a period of years and what tax strategies can you take advantage of?
Most people think that when they have saved enough money to retire, the planning process is complete. However, saving enough money is only the beginning of creating a comprehensive retirement plan—we’ll expand on that point next month when we make an exciting announcement.
In the meantime, if you have questions about your own unique situation or plan, be sure to speak with your Pinnacle Wealth Manager.