Those early days of retirement can be exciting as you are finally rewarded with a little rest and relaxation after all those years of toil. But it can be a bit unsettling, as well, when the regular paychecks you counted on stop appearing in your bank account. Thatâ€™s why anyone whoâ€™s still a few years away from retirement should ask themselves: Am I ready for that moment both financially and emotionally?
The answer could come down to whether you have a solid retirement plan â€“ or a plan at all.
â€œRegardless of how much you accumulate for your retirement, poor planning or lack of planning can put you at risk of exhausting your resources,â€ says Tad Hill, a retirement planner and author of â€œRetire with Freedom: The Five Steps to Getting a Good Nightâ€™s Sleep After the Paychecks Stopâ€ (askfreedomfinancial.com).
Hill says people nearing the end of their working years should:
- Create your ideal picture of retirement. What is it you want out of retirement? Do you want to travel? Volunteer with a charity? Spend time with the grandkids? The first step isnâ€™t about your financial portfolio, Hill says, itâ€™s about forming a clear image of the big â€œwhyâ€ of your ideal retirement. â€œOtherwise, even though your money may last the rest of your lives, you may never achieve your dreams because youâ€™re unclear on your dreams,â€ he said.
- Put your situation to the â€œstress testâ€ with the help of a financial professional. That can include reviewing how to best maximize your Social Security benefits and examining how your portfolio might perform under a variety of market scenarios. â€œAnalyze all the factors that could affect your retirement plan over the next few decades and create a strategy for dealing with those risk factors with as much certainty as possible,â€ Hill said.
- Design your plan. Designing a retirement plan, Hill said, is like creating the blueprint for a house. Some of the concerns that need to be addressed include income planning, investment planning, health care planning, tax planning and legacy planning.
- Build the plan. Once the design is agreed upon, itâ€™s time to implement it. â€œThat can mean making changes to your current structure, adding some things and getting rid of others,â€ Hill said. â€œMaybe risk-prone aspects of your current approach that we need to eliminate were discovered in the design step. We also often identify new strategies that you arenâ€™t using that can really make a difference.â€
Seek continued guidance. Even a great retirement plan may need tweaks and adjustments over the years. â€œYou need to look at whether there are things that have changed in your life that need attention,â€ Hill said. â€œAre there decisions you need to make about a pension or Social Security? Is your spending tracking at the amount you thought it would?â€
â€œThere are no guarantees of anything in life, including how your retirement will work out,â€ Hill said. â€œBut taking action to create a solid and plan for this important part of your life is a critical first step.â€