When planning for retirement there’s an overwhelming tendency to focus on the financial side, and as well as should be. Without a solid tax-deferred retirement plan, there would be no retirement for most people. But there’s also a non-financial side of retirement that we need to be concerned with too. If we concern ourselves strictly with the savings side of retirement, we may face a retirement that has a few gaping holes. In addition to saving money, what other retirement preparations should we be making?
To help you better prepare for your retirement, here are nine things to consider.
1. Pay Down Your Debt
As you plan for retirement, you will need a plan to reduce your debt as much as possible. Debt obligations represent a drain on your income — you are paying interest to someone else, rather than using the money for your benefit.
Before retirement, do your best to pay down your debt — including your mortgage debt (but focus on this one last). The fewer encumbrances you have for your money, the more likely you are to enjoy a successful retirement. Here are some articles to help you reduce your debt:
- Dave Ramsey’s Debt Snowball and Other Methods
- Should You Pay Off Debt or Invest?
- How to Get Out of Debt Fast
2. Start Cutting Back on Expenses
Changing your spending habits take time and you can’t just flip a switch to live more frugally. A better approach would be to begin modifying your consumption patterns years ahead of retirement. You don’t want your retirement to feel like a financial diet, which is exactly what it will be if you have to suddenly cut back on your expenses. More conservative spending habits should be normal well before you reach retirement.
Think about what you will be spending money on during retirement. Consider what you want to do with your money during retirement, and estimate the costs related to travel, housing, food, transportation, and more. You can use your expenses now as a guide for what you will pay later. If you plan to have your debt paid off, your expenses might be smaller than what you pay now. Downsizing your home and your lifestyle can also reduce your expenses.
Here are some articles to help you manage your expenses:
Figure out how much money you need for retirement as soon as possible, and plan your retirement savings to meet that spending goal.
3. Think About Your Retirement Income
You will still need some income while you are in retirement. Many people think about this in terms of saving up a large enough nest egg that makes it possible for regular withdrawals without depleting the retirement savings too much. If you’re in this camp, some of these articles may be helpful:
- How Much Money Do You Need to Retire
- Tax-Efficient Retirement Withdrawal Strategy
- The 4% Safe Withdrawal Rate Retirement Drawdown Rule
However, this is not the only way to plan for regular income during retirement. You can start now to cultivate income streams from web sites, a business, royalties, or other sources. Consider your monthly needs, and how you can meet them.
4. Make Changes for a Better Health
It would be the ultimate irony to reach retirement age with a seven-figure retirement portfolio, but not be healthy enough to enjoy it. Your health, just like a retirement portfolio, is a long-term process that should be prepared well in advance.
The healthcare community warns us of the dangers of a sedentary lifestyle accompanied by a few bad health habits. Since we don’t feel the immediate effects of those behaviors during much of our working lives, the warnings are easy to ignore. But as you approach retirement age, and particularly once you enter the traditional retirement years, those warnings begin to take on greater meaning.
The problem is that once you reach your 60s, poor health conditions related to unhealthy lifestyle habits tend to become chronic and are often impossible to reverse. That makes a strong case for adopting healthy eating habits, a regular exercise routine, and the elimination of habits like cigarette smoking or excess alcohol consumption.
Healthy lifestyle habits adopted early in life provide a much better chance that you’ll be able to live the kind of life in retirement that you hope to.
5. Have a Purpose
It’s usually not until you reach retirement that you begin to fully grasp how important work is to your life and your sense of well-being. This is particularly true of people who have career positions or who are self-employed. Work is often more than just a means to earn a living. It can also be the source of our self-identity and give us a sense of purpose.
You’ll have to be prepared to fill that void by the time you retire. That could mean having a second career, a part-time business, or a more formal involvement in charitable activities. Each of these can give your life purpose, and even a reason to get up in the morning. They also provide a connection with people as well as a “mission in life”.
6. Keep Family and Social Connections
Few people plan for a lonely retirement. Consider your friends and family and your social options. Like retirement portfolios and health, relationships and social connections are developed over time. Be intentional about building and nurturing those relationships now, no matter how busy or distracted you are. Cultivate relationships that can last through retirement, and that can provide you with a support system and social interaction.
If you have a life partner, it is crucial to continue developing that relationship, so that you can enjoy retirement together. Social interaction can help keep you happy, as well as positively affect the health of your mind and your body.
7. Decide Where to Live
The quality of your retirement can be determined as much by where you live as it will on how much money you have. I’m not just talking about whether you live in a retirement community, or at the beach, or even in a foreign country — though I’m not excluding those either.
More fundamentally, you may have some idea as to whether you want to live in a condominium or a freestanding house; in a city, a suburban community or rural location; whether you want to continue to live where you are now or to return to your childhood hometown; or if you have children, whether you want to live close to them, or will you be okay living in some other location?
That’s a lot to consider, and notice we haven’t even gotten into the question of beachfront condominiums or golf communities! Making the decision as to where you want to live when you retire can take many years. You have to decide what is important to you, and who is important, and that might even take some experimentation and preplanning.
8. Long-term Living Arrangements
We don’t like to think that there may come a time when we are incapable of taking care of ourselves, but it could happen. And it may be that you need to spend some time in a long-term care facility, such as an assisted living community or a nursing home. If that is the case, your money may not go as far as you would like.
Carefully consider how much you might need to take care of long-term arrangements, and consider your options. In some cases, certain annuities and long-term care insurance policies can work well. However, it is important to carefully read the terms of these contracts, since not all annuities and long-term care policies are the same.
9. Estate Planning
Not only should you consider your money situation leading up to retirement, and during retirement, but you should also think about what happens after you pass on.
Unless you don’t care what happens to your estate, and what sorts of expenses and taxes your heirs will be saddled with, estate planning is a good idea.
Figure out what you want to have happened to your estate, and whether there is some way to protect your assets as much as possible. You might also need to consider what happens to a spouse or other dependent, and make arrangements to cover a shortfall in pension payments or other income when you pass on. A good attorney can help you sort out your options.
Getting the Planning Help You Need
As you work toward your retirement, you might need some help with planning. Make sure that you do some research ahead of time, though, and consider your needs. Choose help that is experienced, qualified, and capable. A financial professional, or a legal professional, can help you get your affairs in order and help you create a plan that will see you through retirement.
Retirement really is a full-cycle life change, much like going off to college, getting married, or having children. Most everything that you now know in your life will change, and that will mean not only preparing your finances but also your body, your mind, your habits, your interests, and maybe your location.
Have you thought seriously about the scope of the changes retirement will likely bring to your life?
Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.