Nov. 29, 2016 — Your editor has been retired 10 years now. And over that time he has written hundreds of articles that freely dispensed advice about retirement to tens of thousands of people. So what, if anything, has he learned during this decade, and what advice would he give anyone ready to enter retirement?
First of all, let me say how great it has been to be part of the Topretirements.com community all this time. The people I have met online and their wisdom and comments since the site began in late 2006 have been amazing in so many ways. Thank you to everyone in the Topretirements community, you guys have been so
helpful to one another and to me!
On another note, back a few months ago we had some good Member suggestions on how to celebrate the site’s 10th anniversary. One of the best was to share stories from Members about their retirements. This article has links to 7 that came in – and feel free to contact us if you would like to share yours! Case Studies: How Robert and Jan Planned Their Retirement.
My Top 10 Pieces of Retirement Advice
None of this advice is radical or rocket science. To use a football metaphor, planning is all about blocking and tackling. But our brief coverage of these 10 points is only meant to get you started thinking – retirement planning is a big subject and worthy of careful exploration.
1. Start planning early.
Millennials are probably doing a better job of retirement planning than most of us baby boomers – maybe we thought we would never age. You can’t start planning too early for a couple of good reasons. The most critical financial factor to consider is the importance of compounding your savings for as many years as you can. If you delay too long it is hard to catch up. But non-financial issues need to be planned for too. The type of lifestyle and climate you want, how you will stay busy, who you will be near – these are important questions that take time to figure out for the best results.
2. Set goals and timelines.
As part of your planning process you need to set realistic targets for when you will retire (and when you will have enough money to do that).
You also need to set planning targets for the non-financial aspects of your retirement life. The worst thing you can do is retire and have no plan for the next chapter – where you’ll live, what you’ll do every day, what kind of medical facilities you might need, etc. And this piece of advice is just as critical – all that planning aside, you plan has to be flexible enough to be prepared for this reality: most baby boomers end up retiring years before they think they will.
3. Make a budget, and keep revising it.
Your budget process begins with listing your expected expenses in retirement and then matching them against all your sources of income. We are amazed at how many people don’t do this critical step, but you are courting disaster if you don’t. Until you know if you have enough money for the lifestyle you have planned, your plan is nothing. The earlier you make your budget, the more time you have to make adjustments if the numbers don’t add up. Don’t forget to factor in the Medical expense component either – a VERY big “If”. You might be healthy now, but almost every retiree eventually runs into medical expenses they never imagined.
Your financial picture will probably change over time – your investments do better or worse than you think, unexpected emergencies deplete them, etc. By doing an annual review of your budget you have a chance of adjusting before it is too late.
4. Don’t retire too early. The financial consequence of retiring too early is that you don’t have enough money for the long haul. Your average age expectancy might be in the late 70s, but lots of lots of people live into their 90s – or 100’s! Running out of money in your old age is a disaster, don’t let it happen to you. Money aside, a non-financial aspect of pulling the retirement trigger too soon is that you lose your purpose. If you like your job and don’t have a clear dream to follow, why be in a rush to trade that for a big unknown?
5. Delay taking Social Security as long as you possibly can.
Almost every financial expert we read advocates delaying taking Social Security benefits until at least Full Retirement Age – FRA (66 for most boomers and a few months later for younger folks), or even better, to age 70. Yes there are good reasons to take it earlier, chiefly because: your life expectancy is below average, or you don’t have enough to live on. But almost every expert urges you to delay as long as you can, with a caveat. That is, everyone’s situation is unique, and therefore you should discuss your options with a professional to make sure you make the right choice for you.
Taking your benefits at age 62 vs. 70 means you will be taking a huge financial haircut. Here is an example from Fidelity: a hypothetical person taking benefits at 62 might receive $1,200 a month. If she waits until her FRA to collect, she will receive 33% more, or $1,600 a month. If she waits until 70, her benefits will increase another 32%, to $2,112 a month. That’s over $900/month – for life! Her spouse benefits too. He would receive a higher spousal benefit based on her FRA benefit if that were higher than his own benefit. And if she dies first, her husband would receive the $2,112 for the rest of his life.
6. Take lots of scouting trips
Take advantage of your vacations and business trips to scout out where you might want to live in retirement. Take notes, visit communities, and talk with as many people as you can. Then when you actually retire, step up your visits based on your reading and previous experience. The more you know, the better the chances you will make a happy decision. Maybe you will decide to stay right where you are now, but at least you will have thought it through and explored the possibilities.
7. Rent before you buy.
We hear this over and over again: “If I had only rented first I would have known this was the wrong place for us.” Spending a few weeks or a month in a place is just not enough time to know all the factors that makes a place to retire right for you. But if you rent for a year or a season you will know. Buying and then selling and moving again is expensive and hard.
8. Downsize and get rid of stuff early
In our book one of the classic retirement mistakes is to hang on too long to the place you are living in now. Your existing home is probably bigger than you need, which means extra costs for everything – taxes, maintenance, utilities, etc. It is probably on two floors or has steps that will imprison you when you get older. Instead, you could be using that money to have fun and/or share with your children. Likewise getting rid of your stuff can be liberating. It takes up room, and if you wait too long, it will be a horrible burden for your heirs. Get rid of it now and enjoy the freedom.
9. Assume retirement is a long term proposition. Rich suggested in a Comment that we should remind our Members of “… the need to continue retirement planning for at least 10 years AFTER retirement. Even after you retire there will be changes in retirement expectations and plans.” How true Rich! Lets say you retire at age 62, your lifestyle will most likely be very active. But 20 years later you will probably be doing very different things. Your health or physical abilities might have declined, and the home or community that was perfect at age 62 is not right at all anymore. The key is to keep planning and stay flexible enough to adjust to whatever comes your way.
10. Retirement is a reset on life – seize the opportunity
This is our very favorite piece of advice to retirees. However your life has gone up to this point, good or not so good, here is a reset point. Sure, your body or your finances might not be in great shape, but there are always new possibilities. You can start a new career, learn a language, travel, volunteer, begin a new sport or lifestyle. But a reset is only possible if you consciously plan and choose it. If you passively let retirement wash over you, the opportunity is lost.
In preparing this article we realize we tackled this same “What We’ve Learned About Retirement” topic at our 6 year anniversary – there are some interesting differences but the core message remains the same. In fact over the years we have plowed the retirement field frequently – this is the 54th Blog article we’ve written on “Retirement Planning”! The good news is that although there are nuances and additional avenues to explore, the basic approach to planning retirement involves some basic common sense ideas available to anyone.
Comments? What other planning tips would you add or emphasize? Tell us what worked or didn’t work so well in the Comments section below.
Read some of our favorite member planning stories
Jay Michaels Retirement Tour
Sandy’s Active Adult Visits and Adventures
It Is Rocket Science: How This Space Engineer Planned His Retirement