Kevin Ward, Advisor
Retirement is a sprawling topic. The word alone can raise questions, emotions, and concerns—about how exactly your future will look, what life will entail as the day-to-day changes, how the financial situation will unfold, and more. Though far from exhaustive, we will lay out herein a few of the major areas to think about and what to expect when you’re approaching retirement, broadly broken into two buckets: financial considerations and lifestyle and emotional considerations.
Naturally, some of retirement’s most significant shifts involve money and expenses, a major one of which is health insurance. Most full-time employees today receive health insurance through their employers—narrowing their range of choices and mitigating their premium costs, which are typically covered partially or fully by their employers. In contrast, retirement opens a world of health insurance options, which can be daunting to decipher. Further, prices can vary dramatically, as can coverage levels.
For most retirees 65 years and older, Medicare is an option offering generally lower premiums than many private plans—though private plans may offer coverage more suited to your health situation. Retirees under age 65 may similarly purchase a plan through the federal marketplace established under the 2010 Affordable Care Act, through their state insurance exchange, or a private insurance provider. We could easily write a short novel on all the health insurance options available—and there are many good resources available online that outline significant differences and considerations—but suffice it to say among the critical factors are:
- How much you will pay in monthly premiums.
- How high the deductible is, what is and isn’t covered.
- Whether your current doctors are in the network of the plan you’re contemplating.
Another important monetary shift in retirement is your income source, which will no longer be primarily your employer. Planning is key—understanding your expenses and income sources and budgeting well in advance will help ease the anxiety that can accompany the cessation of regular paychecks. As with health insurance, government programs like Social Security for eligible retirees 62 years and older can help provide some monthly income. If you have an equity portfolio, you may be able to replace some or all monthly income via dividends and interest payments. Similarly, investment or rental properties may generate monthly cash flow. Establishing monthly or bi-monthly recurring transfers or deposits into your checking account can serve as a paycheck replacement and help you maintain a consistent approach to your household budgeting and spending once you’ve retired.
It’s also worth considering where you will live. Perhaps you already live in your dream home, can afford to keep and maintain it, and have no interest in moving. But you’ve always thought about a second home—maybe in a warmer location, maybe nearer the ski slopes for some winter recreation. Or, perhaps your home isn’t practical for the lifestyle you anticipate in retirement—maybe you’d like to be nearer to other family members, or you’d like a smaller place that’s easier and more cost-effective to maintain. These are all things that may shift as you approach and enter retirement.
Finally, think about whether there are other ways in which your financial goals will change—no longer will you strive for retirement, but you may have new financial goals, whether paying for your grandchildren’s educations or purchasing a second home. Your focus may shift from covering your own living expenses to thinking about leaving a legacy or supporting causes about which you are passionate.
Critical to all financial shifts in retirement, whether insurance, investments, or real estate, is planning for them sufficiently in advance—particularly if they require meaningful changes in your savings or investment strategy. Planning early will ensure you can position yourself as well as possible and increase the likelihood you can feasibly accomplish your goals and live the life you’ve envisioned for yourself and your family.
There are also important lifestyle and emotional shifts in retirement—where and how you will spend your time and how your daily emotional and physical realities will change when you’re no longer going to a job or an office. When it comes to keeping busy, the options are myriad and exciting. Perhaps you’re not ready to retire entirely and would like to work part-time, whether for your existing employer or elsewhere. Alternatively, you could offer the benefit of your years’ experience and wisdom gained via consulting, either through an independent consulting firm you establish on your own or through an existing one. Your experience could also tremendously benefit any number of boards—non-profit or for-profit, depending on your interests.
Then, of course, there are the many ways to spend time that doesn’t involve work at all, but instead family, friends, travel, and the pursuit of passions often deferred during your prime working years. Perhaps you’ve long wanted to travel the world with your spouse or other family members or friends. Maybe you’ve eagerly awaited the day you could teach your grandchildren the finer points of golf or the piano. Maybe you’re ready to take the senior tennis world by storm yourself.
However you plan to spend your time, one thing is assured: Your days will look different. And these changes can evoke confusing and challenging emotions. Shifting from going to a specific place or doing a particular set of daily tasks to planning your own time with much more autonomy can overwhelm you. It’s advisable to think about these changes and the potential emotions in advance—not necessarily so you can avert them or manage them perfectly, but so you won’t be surprised when they arise. Also important is planning with your spouse and other family members whom you anticipate will be impacted—for example, your children and grandchildren who live nearby. Envisioning your new daily life with those who regularly participate can help manage and mitigate the jolt from stepping away from a career.
As with all significant life changes and milestones, retirement introduces a wealth of considerations; financial, personal, emotional, and otherwise. Though it can be easy during your prime working years to focus on your career and keep your head down, it’s important to lift it periodically to assess your situation—where you are, where you’d like to go—and ensure you’re positioning yourself to meet those goals. Leveraging the experience of a trusted financial advisor to help you create a plan that can flex as your circumstances change will help you navigate the complex world of retirement.
If you have more questions, please reach out to our team at breckenridgeteam@monetagroup.com.
© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
