How to Create a Retirement Action Plan

Let’s talk about what retirement is and, more importantly, what it isn’t. Yes, retirement is the opportunity to enjoy your golden years and to reap the benefits of a lifetime of hard work. You might even consider retirement to be a reward for a ‘job well done.’

But, retirement isn’t something that’s incredibly well-defined. You are the only person who can answer the questions like What will my retirement be like? and What’s most important to me when I retire?

Creating your retirement action plan is a simple, approachable process. You don’t need an understanding of complex financial projections. But, you do need to consider specific lifestyle and financial issues. As it turns out, simply taking the time to answer a few questions about your expectations is a great start.

Move Beyond the Bucket List

Dreaming is an important part of the retirement planning process. Chances are there is a once-in-a-lifetime trip or experience you have set your sights upon. Balance your dreaming by understanding that the majority of retirement is spent in everyday living. Begin your written plan with your expectations for daily life with family, friends and the community. Consider questions such as:

• How long do I want to work? Will I continue to work in a different role after retirement?
• What kind of standard of living is acceptable? What is a reasonable cost of living?
• What kind of family responsibilities will I have?
• What kinds of personal interests and hobbies do I want to pursue?

Answer the BIG Questions

Take a hard look at what it will take to provide for your basic needs throughout your retirement. As you examine your choices for housing, healthcare and estate planning, you’ll be able to add another solid layer of detail to your retirement plan. Consider these three areas:

• Housing: What is my housing situation? Does it make more sense to rent or to own my home? How much space do I truly need and is there an opportunity to reduce costs?
• Health Care: Am I relatively healthy? Medicare isn’t available until age 65, and it may be cost prohibitive to purchase individual health insurance before that age. Also consider chronic conditions and end-of-life care. The Journal of General Internal Medicine researched end-of-life medical expenses (in the last 5 years of life) among older adults. Typical expenses range from $38,000 to over $100,000 depending on individual needs and the level of care provided. Your retirement plan may need the capacity to provide a lump sum payment towards the end of your life span.
• Estate Planning: What kind of legacy do I want to leave to my family or to my community? Are there assets, investments or property that should be factored into the plan?

Take Action

Now that you’re armed with your expectations for your lifestyle and essential needs, you can calculate how much you need to save for retirement. Your investment portfolio and supplemental forms of income, such as Social Security, pensions or annuities, form the foundation of your plan.

• Calculate How Much You Need to Save: Aim to save at least 10 to 15 percent of your annual income throughout your career. Professionals who reach their 40’s or 50’s without starting a retirement plan need to save two to three times more in order to make up for lost time. If you’re close to retirement, increase your savings as much as possible.
• Decide When to Draw Social Security: The Social Security Administration allows you to draw benefits as early as age 62 or as late as age 70. Understand that drawing benefits before your full retirement age may reduce your benefits by about 30% (or about 32.5% if you’re drawing benefits as a spouse). For those born between 1938-1958, full retirement age ranges from age 65 to age 67. Full retirement age is 67 for those born after 1959.
• Partner with Trusted Advisors: Resist the urge to let your company 401(k) or other retirement account go on autopilot. Turn to the experts to take you where you want to go. Many individuals work with a financial professional, an attorney and an accountant throughout their career and the retirement planning process. Select advisors based upon a strong connection and personal fit. Establish clear expectations for service level, communication and fees in order make the most of the relationship. And if you are not working with advisors, ask a close friend if they have any referrals.
• Uncover how your personality impacts your retirement strategy. Visit theRetirement Style Matters website to gain insight into who you are and how it impacts how you invest. We’ve identified four different retirement styles, or personalities. Which are you? To find out, take the “What’s My Retirement Style” personality assessment. Does it accurately capture your personality and financial mindset?

Remember, retirement is fun. But, the most important part of retiring is the simple act of planning it.