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11 Retirement Tips Thumbnail

11 Retirement Tips

As a CFP® I often get asked what are the most important things to know when it comes to retirement.  At the same time, I have been asked by several people to write a Top 10 list of retirement mistakes.  Since I prefer to be positive here is my list of the Top 10 Keys to Retirement.  They are not in order of importance and I included a bonus one!

  • Understanding Expenses – Present and Future
    1. In my opinion, this is the most important key to success in retirement.  So many people do not have a firm idea of their expenses.   Knowing your current expenses is the best way to predict future expenses.  Once you know your expenses you will be able to identify which will disappear once you retire, like 401k contributions.  You can also fill in expenses that start in retirement, such as Medicare premiums.
  • Develop Your Retirement Plan Before You Retire
    1. To steal the “retirement redzone” theme, you really need to start your plan for life in retirement five years before you plan to retire.  This period is when you should start getting your arms around items like Social Security optimization, Medicare options, restructuring your investment accounts to shift from accumulation to distribution, identifying your expenses, organizing your estate, and more.  Too often I see people who begin their Plan in Retirement after their last day working.  It isn’t too late at that point, however, there are opportunities you could miss by failing to start earlier.
  • Completion of Estate Planning
    1. Estate planning isn’t simply establishing a trust nor is it limited to only the rich.   You need things like Powers of Attorney (POA) for medical, financial and other issues.  Or at a minimum having a will.  Proper titling of accounts, like Transfer on Death (TOD) and updating beneficiaries are part of the estate planning process.  One final thought – having a trusted financial POA can help prevent scams of seniors, which still happens too much.
  • Controlling What You Can
    1. No one controls the market, but, retirees continue to pay advisors based on this faulty assumption.  Instead, retirees need to focus on controlling things they can, such as how much they pay for advisory services and investments, what accounts they take money from and knowing how this affects their taxes, and strategies to optimize Social Security.
  • Automatically Taking Social Security as Soon as Eligible
    1. Waiting until age 70 increases your Social Security 76% as opposed to taking it early at 62.  People are living longer and a primary concern is running out of money before you run out of life.  There are over 2,700 rules with Social Security.  Too many for all their staff to understand.  Take the time to work with a specialist who utilizes software to optimize Social Security before you sign up simply because you are eligible.
  • Assuming Retirement = Spending Less
    1. Spending in retirement is like a reverse bell curve, but with a steep start.  Nearly half of retirees spend more in the first two years of retirement than before they retired.  Spending then decreases until it rises again as you age due to higher healthcare costs.  Again, this is where knowing your expenses is critical.
  • Enjoy Yourself and Stay Busy
    1. Keeping your mind, soul, spirit and body as active and engaged as possible is paramount.   If you are healthy, take a trip! I often see clients become very bored in retirement.  Solutions to the boredom may be volunteering or a part-time job.  
  • It’s Now About Distribution, Not Accumulation
    1. Most advisors focus on accumulation of assets.  In retirement you need someone who specializes in the efficient and effective distribution of assets.  This person must also be looking at the whole picture, not just your investments.   Items such as Medicare, Social Security, long-term care insurance, estate planning, taxes and more must all be considered when it comes to making sure you do retirement right.
  • Underestimating
    1. Do not underestimate your life expectancy.  Americans are living longer.  We are getting closer to people being in retirement nearly as long as they worked.  Your plan for retirement needs to reflect this increased longevity and be ready for how factors like inflation can affect it.  
  • Healthcare Costs
    1. Healthcare costs continue to rise and are becoming a bigger expense for retirees.   Retirees need to estimate their healthcare expenses before retirement and track them in retirement.  Medicare options must be reviewed annually.  Medicare isn’t like luggage where once you buy it you have it forever.  Take the time to evaluate the various plans to make sure you have the right coverage at the right price.
  • BONUS - It Is Your Retirement – Make It Personal
Remember, this is your retirement.  All retirements are personal and your plan needs to be personal to you.  Be wary of cookie-cutter solutions.  Most importantly, make sure you are in agreement with any plan being recommen