Meeting expectations in retirement requires careful planning
Consider the fact that if you join the workforce after high school or college, you have between 40 and 50 years of employment before you retire.
If you happen to extend your education to become a more skilled professional, like a lawyer or physician, you still have a good 30 to 40 years of service in your chosen career. That's a long time. If you are at or near retirement: Congratulations! You deserve a break today.
However, without some careful planning, retirement might not be all it's cracked up to be. We will get to the financial end of retirement planning, but there is so much more than just making sure the bills are paid, so we'll start by discussing some less obvious strategies first.
It may seem obvious, but you don't have to retire when you're 62 or 65, just because Social Security or your pension plan kicks in at this age. If you thoroughly enjoy your work, and receive a sense of pride and accomplishment by what you do, there is nothing wrong with continuing on in your chosen profession.
In fact, so many people identify so heavily with their careers that at retirement they, in essence, lose their identity. If you're healthy and enjoy your work, there is absolutely no reason not to extend your career into the later years of your life.
Sometimes at retirement, many have a to-do list that's been waiting for them for 25 years. Often, this list is completed in the first week of retirement, and then the question is, "What do I do with the rest of the next 25 years of my life?"
During your working years, it would be advisable to develop some hobbies. Whether it be golfing, playing a musical instrument, sewing, traveling, reading, hunting, fishing, etc., try to develop some interests unrelated to your job while you're still working. This will help make a much easier transition into retirement. Churches and schools are always looking for volunteers to supply needed services for their organizations. Instead of waiting until retirement to volunteer your services, do so ahead of retirement, and you'll find it to be even more fulfilling when you have extra time on your hands.
From a financial point of view, you can help to protect your retirement savings by first reducing your debt (this is an integral part of your retirement plan), establishing an emergency fund, if you do not already have one, and acquiring adequate insurance coverage. By creating a plan that realistically estimates income and expenses, you can ensure that your money lasts as long as you need it. Planners may suggest having 70 percent of your pre-retirement income upon retirement. Unfortunately, with our current economy, and imminent tax increases, you should possibly look at that figure being closer to 100 percent of your current income. (A big fuss is made about the Dow crossing the 10,000 mark again as it did in 1999, but nobody seems to mention the fact that the value of our dollar has lost 30 percent in that same time period).
Depending on your age and whether you're receiving or plan to receive Social (In)Security, the Medicare application process, timelines and premiums vary. Keep in mind that applying late may result in delayed benefits and higher premiums, so be sure to note deadlines and dates on your calendar.
Speaking of Social (In)Security, you'll need to apply three months prior to the month of your 65th birthday or three months before you want to start collecting benefits. Note deadlines and dates on your calendar. Consider having your checks directly deposited into your checking account, so that, even if you're on vacation, the deposit is there at the same time each month.
It is important to select the pension benefit, IRA, or 401(k) benefit that fits your situation. Going around town asking what everybody else did, may not be the best method of finding out what's right for you, as their situation may be altogether different than yours. Be aware of what the process, timelines and options are for your retirement plan asset, and secure appropriate documentation from your employer.
Finally, it would be advisable to review wills, trusts, powers of attorney and beneficiaries. Keep in mind that retirement savings accounts normally pass directly to the beneficiaries you have designated for each account, so you'll want to keep your designations up to date.
Retirement should be an exciting time for you -- a time that rewards you for your years of service in your chosen profession.
You very well could be in retirement nearly as many years as you worked. Take the time to prepare yourself for the next step, after a job well done.
* Next month: The Roth IRA
Tim Schumacher represents Strategic Financial Partners in Hays. tschumacher@htk.com