Let’s face it—planning for retirement is challenging. There’s so much to consider from when to retire, to how much money you will need in retirement. Trying to answer these questions without knowing all of the facts of your financial situation is the reason that many couples end up in their mid-50s never having had a full discussion of their retirement plans.
To help you have a better understanding of what you need to consider for retirement, we created the Fearless Financial Plan for Retirement Checklist. It’s designed to reduce the angst many feel when approaching the topic of retirement planning and includes categories of items to consider and action steps you can take in the years leading up to retirement. The checklist was designed to simulate the areas of retirement planning that we typically cover with our clients, so it is very complete. By working through it, you’ll gain a better understanding about what you can do on your own and where you may need to get additional help.
Time is running out—start planning now
It’s not uncommon for many financially successful Boomers to self-manage their savings and investments into middle age. By that time, however, retirement is fast approaching making the stakes higher. If this sounds like you, it’s time to get serious about retirement. You simply don’t have time to recover from mistakes or big market swings which can occur at any time.
Ron Rubin, CEO & Managing Partner, on the importance of creating a financial plan.
Replace fear and avoidance with facts
We suggest you begin by defining your goals—like where you plan to live, if you want to travel, or what legacy you want to leave. The next step is to prepare a written financial plan that reflects where you are today and what you will need to fund your vision. If you don’t have a plan, you’re just throwing darts hoping you’ll hit the bullseye. Many people fear that they won’t have enough money to maintain their lifestyle once they retire. That’s a very real fear, no matter your level of wealth. In fact, even high-net-worth couples are at risk of running short when they become accustomed to an expensive lifestyle built during high-earning years that may be unsustainable in retirement.
Checklist Item – Make a Plan:
Your plan should reflect realistic future goals and the saving and investment strategies required to achieve them. Start by developing your Net Worth Statement to see your total financial picture and how everything fits together to quantify your total wealth. You’ll also need to establish annual savings goals and longer range retirement income projections. Another helpful step is to track your current spending for a period of time (6 months – 1 year) so that you have clarity on exactly how much you’re spending and which expenses will continue during your retirement years.
Protect what you have
Preparing for the unexpected is part of reducing the risk that your plan is derailed by unexpected events. It’s important to have discussions about how your health could impact your retirement either by forcing you to retire early or by using up assets earmarked for income once you stop working. You’ll also want to create key estate planning documents to protect loved ones in the case of an untimely death. Be sure to include the creation of a will, durable general power of attorney and a health care proxy in your estate planning.
Checklist item – Stress test your plan:
Once you’ve created your retirement plan, stress test it for a variety of “what if” scenarios. For example, consider the impact of a forced early retirement, lower investment returns, having to financially support a child or other family member, or how the untimely death of you or your partner would affect your plan. Scenario analysis will tell you whether your retirement plan is solid and may provide important insight on areas of greatest risk. Here you may want to consult with a financial advisor who is equipped to run the numbers and provide advice on your plans for retirement.
Don’t forget the cost of healthcare in retirement
Often one of the largest expenses in retirement is health insurance. You’ll have to make important decisions about Medicare and the many Medicare supplement options once you are no longer covered by your employer-provided heath insurance. In cases where you have pre-existing conditions, reviewing your options and making a decision can be more complicated. We find that potential changes in the US healthcare system at large make this category of planning difficult to complete until you are very close to your retirement date. Another complication a couple faces is when they have employer-provided coverage for the entire family. If the employee retires and the spouse is younger in age, filling the gap until Medicare becomes available can add unexpected costs to the retirement spending budget.
Refine your habits and look forward to retirement
We cannot overemphasize the necessity of preparing for retirement well before your last day of work. The key to creating a fearless financial plan for retirement is having a clear picture of where you are now and a roadmap to get to where you want to be.
As our Fearless Financial Plan for Retirement Checklist emphasizes, retirement preparation requires understanding both “the what” and “the how” of creating your retirement lifestyle. If you begin planning well in advance, you are more likely to successfully balance the challenge of sacrificing the things you enjoy in your current lifestyle to support your future financial security. That’s one of the best ways to bridge the gap from your retirement dreams to reality.
Dawn Doebler, CPA, CFP®, CDFA®, Senior Wealth Advisor, Bridgewater Wealth & Financial Management
Dawn’s experience spans more than 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents.
