September 21, 2010

Retirement Simplified

There is nothing simple about retirement. Everyone has a different path and a unique set of circumstances to face. But, there are some basic decisions that must be made. While I don't suggest this list covers all the issues you may face, it is a good start.  If you can answer these questions you are well on your way to a successful retirement.

When do I want to stop working ? A goal without a timetable is simply a wish list. You don't need to pick the exact day at some point in the future. But, you do need to commit to something: late spring of 2012 is fine. Now you know where the finish line is. Develop plans that  work backward from that time. For example, 1 month before I retire I will firm up any financial issues with my employer. 4 months before my "Freedom Date" I will begin gathering information about additional health care options. You get the idea. With a goal line in mind, work in reverse toward today.

Is my financial house in order?  If nothing else the last few years have made many of the "rules" obsolete. Even the wisdom of owning your own home is up for review by many. What this means is a fresh look at all parts of your financial plan before you turn in that letter of resignation. Is the 6% annual rate of growth you were counting on realistic anymore?  Is there a chance Social Security payments will be means-tested in the future? Are muni bonds still safe investments when cities face bankruptcy? 

How is my health and my health coverage?  Both will have an important impact on your life. Do you have health challenges now that might limit you in some significant way?  Does your spouse have a disease that is chronic?  How about your insurance? Do you keep full coverage after you stop working? Can you afford Medicare Part D or supplemental coverage? If you need to buy a new policy will anyone sell you one at a rate you can afford?  Personally, I think the costs and direction of our health care system will have a bigger impact on retirees than anything else on the horizon.

Do I want to work after retirement? After you finish the financial review, the question may be do I have to work after retirement? But, let's assume that isn't the situation. For many of us work has been how we defined ourselves. Leaving all that behind may be very tough for you. Maybe this will be the perfect time to start your own business. Part time work is a viable option for many. Extra income, staying in touch with people, and feeling needed are reasons often cited why part time work is attractive.

Where do I want to live? This is a biggie. I strongly urge you to not make a move soon after you retire. There is too much upheaval in your life as it is. A move away from friends, family, and the familiarity of the area should not be undertaken lightly. You may be sick of winter and snow. Your grown children and grandchildren may live quite a distance from you. Throwing away your winter coat sounds heavenly. Being closer to the kids would be wonderful. You may be absolutely right. But, being far from everything that gives you roots  has its own costs. If possible, spend time as a long-term visitor in the new locale before giving up everything at your former home. Don't rush this decision. It will have a major impact on your happiness and health.

What will I do to stay busy and motivated? It is the rare person who can answer this question with much assuredness before retiring. You will have ideas and wishes. But, until actually living the life you won't really know what might unfold. My suggestion is to make plans. Get excited about doing the things you have not done during your working years. Then, remain flexible. Be prepared to make corrections in your direction. Be OK with deciding one thing you thought you'd love isn't the answer, but something new you just discovered may be.  

Just six steps to a simplified retirement?  Not really. It is more involved than that. But, these questions are at the heart of the process. If you feel comfortable with your answers I'd suggest you are well on your way toward a successful transition.

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  1. Good points Bob and I think that it is really all about planning - taking time now to address the areas where your life will change when you retire. Big changes across the board but nothing that you cannot handle as long as you are not taken by surprise - be prepared. I agree with your suggestion regarding moving - too many changes at one time can be overwhelming and your decision making may be impaired. We are researching where to possibly move at a date closer to our official retirement maybe even before if we are lucky.

  2. In a comment on a earlier post a reader addressed the moving after retirement issue. He and his wife made the decision to move to be closer to family. They left their options open by renting for awhile before committing permanently to the area. I thought that was a very smart decision.

    You live in a beautiful area of the country, Dave. Maybe we could swap houses!

  3. Hi Bob! Wonderful tips!

    I'm a little ways from retirement but it good to start learning about it. Last year we decided to move to the place where we wanted to retired (San Diego). We thought that there was no need to wait until later to live in the place of our dreams.

    I plan on working after retirement, hopefully for joy and because I'm passionate about what I do.

    It's always great to learn from an expert on the subject. Loving blessings!

  4. San Diego is beautiful. It is where both my daughters lived for a few years and where Phoenix residents escape the summer heat.

    Thanks for the kind words. I appreciate your visits to my blog and your comments.

  5. Our solution to the "Where do you want to live?" question is RVing. We still have kids n high school, but once they have graduated, we want to buy an RV and travel the country. Not only does this postpone the decision about where we want to settle, but it can give us a real feel for potential candidates. Spending a month in an RV park, shopping, reading the local news, eating at the local restaurants and getting a feel for the personality of the area beats a quick trip in a motel anytime.

  6. If I could convince my wife, I'd be driving right along behind you, Dan. I don't think I could do a full time RV life. But, stopping in one place for several weeks to get a feel for it and the people is a very attractive idea to me.

    The last Road Trip we took proved your point exactly. We tried to cover too much ground in too few days and felt rushed. If you haven't read it, take a look at the September 3rd post and imagine if we had doubled the amount of time we allowed ourselves.

    Readers: Dan started blogging about the same time I did. Check it out by clicking his name above. And, Dan, thanks for the link on your site. Maybe I'll learn to fly fish and we can exchange ideas!