My Retirement Plan Ends… Almost
In prior posts, I discussed how to determine how much you will need for retirement and how to get that amount. We discussed either having a flexible spending approach depending on financial and market conditions and/or getting a steady stream of income using either bond ladders and/or annuities especially to quell stock market jitters during retirement. We also discussed plugging your financial leaks by paying off high interest debts and not co-signing on kid’s loans.
Try your retirement lifestyle before you “buy.” There is no question that deciding to retire is one of the biggest financial decisions you’ll ever make; so, I recommend that you take it for a spin before you commit to retiring. If you plan to volunteer or work part-time in retirement, test it out now. During weekends, vacations or on a sabbatical from work, focus on the hobbies or other activities that you hope will fill your days in retirement. I can assure you that there are plenty of people who find that retirement isn’t for them or wasn’t as envisioned.
A retirement test run is also a great opportunity for spouse to talk with each other about how they envision retirement – and frankly, figure out whether they can stand to be in the house together all day. If your spouse’s vision differs from your, look for ways to meet both partner’s goals or at least try to find a compromise.
A practice retirement can also help you solidify your financial preparations for retirement. The idea is to continue working but stop contributing to your retirement accounts using that money instead for either the fun activities that you plan to pursue in retirement or to pay down debts. This way, you have a safety net instead of calling it a day.
Expect the unexpected. No matter how well you plan or whether you adopt my strategies, , even the best laid plans of mice and men can go awry and are subject to change. Interestingly, only one in three current retirees have retired when they planned to retire. More than half retired sooner than they expected, often because of job loss or health problems.
Thus, you need a contingency plan in case you need to retire earlier than expected. For example, if you lose your job in the years leading up to retirement, it may be difficult to find a job at the same salary level; however, any job, even part-time, may significantly boost your retirement prospects. Most people dramatically underestimate the financial benefits of even a modest amount of part-time work in retirement. Thus, a job that pays one third of your old salary can help you draw less from your portfolio and help delay in claiming Social Security, which I have recommended in prior posts.
The final part of the series can be found here.
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