With the average lifespan of the human race expanding more than ever due to healthcare advances, it’s not unlikely that people will be retired for 20 or even 30 years. Retirement is as much a journey as the journey it took to get there. Here are five steps to take to make sure you put the glow on the golden years.
Take charge of your financial buckets. If you’re going to be living off your savings for 20 years, it’s imperative to make sure all the parts fit together. What do you have and what changes need to be made? The sooner you reconnect with all of your assets and liabilities, the easier it will be to make discerning decisions as you move from the accumulation phase to the distribution phase of life.
For example, a cash value life insurance policy that you purchased twenty years ago when you had young children, may no longer be a good fit for you. What options do you have for using it in retirement? Can you take loans, or should you cash it in? What are the tax consequences? How do you maximize what you can get from Social Security? There are over 500 different ways to take it.
Don’t leave these questions for the last minute. Consult a financial advisor with experience working with retirees or pre-retirees.
Build your social resiliency. Social isolation is being recognized as equal to or greater than physical health problems such as obesity or heart conditions. Not going to work every day can make for quite a lonely existence. How will you stay engaged with people you care about or the community at large? Do you want to take classes? Do you want to volunteer?
Many times, people find themselves getting away from something. “I can’t wait until I don’t have to deal with ____”. Let’s put a positive spin on it and create a healthy outlook. What do you want to retire to, or rewire for? What type of people do you want to be around? How can you start creating those social support structures ahead of time?
Drill down on mindsets around cash flow. You are approaching the distribution season of your cycle. There is a psychological shift that takes place when you are no longer “working” for the money that comes into your life.
You will now be getting a “paycheck” from the fruits of your labor in the form of distributions from investments. It may be taking equity out of your home in the form of a sale and downsizing, or taking out a reverse mortgage. It could be the sale of a business or creating a charitable remainder trust to minimize taxable gain and create an income stream. You could be starting to withdraw from a pension such as PERA or from former employer.
Bringing money into your life with integrity, competency, dignity, grace and joy is foundational to financial health. It is good to reflect on, discuss and deal with what changes are coming, rather than have emotions blindside you when you cross that “retirement” line in the sand.
Minimize debt. A study done by the Michigan Retirement Research Center found that Americans between the ages of 56 and 61 are carrying more debt than any time in recent history. Is it your own spending choices or the decision to co-sign on a child’s student loan that is weighing you down?
Set to task to be out of debt before you start taking Social Security. If you owe money on a student loan (yours or someone you co-signed for), the government can shave off up to 15 percent, provided your remaining monthly benefit doesn’t drop lower than $750. You do not want to be paying consumer debt that carries higher interest rates than your long-term investment accounts.
Embrace the impending season graciously. Our culture tells us to “fight aging”. What if we start cultivating the integrity and dignity inherent in elderhood?
Picture your days. Find that balance between vacation and vocation. What do you enjoy about your days? How do you picture yourself replicating the parts that challenge you and keep you engaged? What will fill your days in meaningful ways? What are the financial implications of your vision?
Many times, our identity is tied very closely with what we do to earn a living. You are so much more than a gerbil on a wheel. We need to welcome this opportunity to polish a new facet of our identity. As we ebb toward a new season of life, we need to embrace that, like a mighty oak, we are the same tree, our leaves are just changing color!