Are you thinking about leaving your work life soon? Retirement can be an exciting milestone in your life, allowing you to spend your time however you choose. But to get there, you must prepare – both financially and emotionally.
To help you get a plan in place, here are seven questions you can ask yourself:
1. Are You Really Ready to Retire?
While most people leave the workforce around the age of 66, there’s no set-in-stone deadline.1 Just because you’re reaching the age of retirement doesn’t mean you have to give up a job that you love. By the same token, if you’ve always dreamed of retiring early, you might just need help making a plan. Regardless of your situation, don’t feel pressured to retire until you’re ready to make the transition.
2. How Much Money Do You Need to Retire Confidently?
There’s no magic number or formula that tells you how much you need to save, especially because your costs will highly depend on what you want to do with your retirement years. To help create a clearer picture, use your current cost of living as a baseline, and don’t forget to consider factors like inflation or lifestyle adjustments. It’s important to remember that you’ll likely have a lot more time on your hands once you’ve stopped working, so think about how you’ll it – what will your hobbies and other activities cost?
3. How Much Will Health Care Cost?
Healthcare costs can quickly add up in retirement years – especially if you’re too young for Medicare, which you become eligible for at 65. You might be able to purchase health coverage through a previous employer with COBRA, or you can buy private insurance on your own. In addition to insurance costs, you’ll also want to consider long-term care expenses, as people 65 and older have a nearly 70% chance of needing these services, according to the Administration for Community Living.2
4. What Income Streams Do You Have?
As you start thinking about retirement, it’s critical to take into account all your sources of retirement income. This might include:
● Savings and retirement accounts
● Supplemental income from life insurance
● Social Security benefits
To get a better picture of how confidently you could live off of these sources, compare this total retirement income with your intended spending habits.
5. Have You Created a Plan For Your Retirement Savings?
After spending most of your life accumulating wealth, retirement is the time to use it to achieve a reliable income stream. For many people, this might involve moving money from old 401(k) or 403(b) plans into an IRA with the help of a financial
advisor. Then, you can either set up periodic transfers into a checking account or withdraw a lump sum if you need the extra money.
When building a plan for drawing on your retirement savings, be sure to consider important age thresholds for retirement account withdrawals and social security benefits. Currently, you must be 59 ½ or older to draw from your retirement account without paying an early withdrawal penalty and you can start claiming Social Security benefits at 62. Once you turn 73, you may have to make Required Minimum Distributions (RMDs) from your tax-deferred retirement accounts every year.
6. Is Your Plan Financially Viable?
Before you get too far ahead of yourself, it’s crucial to think pragmatically about your retirement plan. For instance, have you accounted for inflation and the potential tax consequences of drawing from your investments? It’s important to note that transfers from 401(k)s and traditional IRAs are taxed as ordinary income. If you’re under 59.5 years old, you’ll also incur a 10% penalty for any withdrawals.
7. What Does Retirement Mean For You?
Finally, ask yourself what retirement really means for you. Do you want to keep working on passion projects, or spend more time with loved ones? Focus on what you want to do, as it’s not only important for your sense of fulfillment, but it will also help you plan your finances accordingly.
Retirement can be a truly freeing time, but it also involves some big decisions and a lot of forethought to do it right. You don’t have to make this decision alone. Your financial advisor can help you address your worries and help you determine if retirement makes sense for you financially, or help you get there if you’re not quite there yet.
Robert (Rory) J. O’Hara III, CFP®, CRPC®
Founder I Senior Managing Partner
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1 “United States Retirement Age.” Trading Economics, February 2023.
2 “How Much Care Will You Need?” ACL Administration for Community Living, February 18,