What is Your Retirement Vision?

Financial PlanningPosted on October 31st, 2018No Comments

Written By: Ryan Klemm, CFP®

We spend our entire adult lives working to reach the destination known as retirement: a period of life that many imagine filling with travel, relaxation or endless rounds of golf. In actuality, retirement can be one of the most challenging phases of life and one with many new unknowns. If you do not prepare for retirement both financially and personally, then you ultimately “quit” 30+ years of a known routine cold turkey. For this reason, it is important to ask the right questions and seek guidance on how to navigate this phase of life before you reach it and unfortunately, this is often an overlooked step of retirement planning. With that being said, we share three retirement FAQs to consider as you plan for retirement.

  1. How much can I safely spend from my portfolio when I retire?
    • This can easily be considered the most important question to ask, and have answered, when planning for retirement. Throughout your career, your entire financial life was based off of a regular or semi-regular paycheck, and therefore you need to identify your spending capacity once that paycheck is no longer automatically deposited into your account. Additionally, as you think about your level of spending in retirement, it’s important to understand what your cash flow will look like and to determine the safe amount that is available for withdrawal from your portfolio. Some financial outlays may drop off of your Cash Flow Statement (for example your mortgage, a portion of taxes, retirement savings, etc.) while other expenses may increase (travel, leisure activities, gifts). We implement a Safe-Spending System for our Clients during retirement that calculates a Safe-Spending Target, and when factoring in decision rules, allows for a safe amount of spending throughout the duration of one’s life.
  2. When is the best age to retire?
    • Another great question! And one that has a few objective answers and other subjective answers. The objective answer includes specific ages that signify important milestones in your path towards retirement and should therefore be factored into your decision:
      • Age 59 ½ is when you are able to take penalty-free distributions from your IRA or 401(k);
      • Age 62 is when you can take early Social Security distributions (at a reduced rate); and
      • Age 65 is when Medicare kicks in.
    • The subjective answer is also quite simple – it’s when you feel ready to! As long as you are factoring in the answer to our first question shared today. Once you have identified how much you can safely spend, and it fits into your retirement picture, then you have the freedom to select when the Golden Era begins.
  3. How do I spend my time in retirement?
    • You’ve officially decided to retire, had your retirement party at work and woke up the first morning thinking “now what?” It’s often the case that we are working towards retirement, but don’t actually think about what retirement will consist of. In a finite approach, retirement provides you with, on average, an extra 40 hours a week of unfilled time. What does that time look like? We spend years exploring this with Clients to help them prepare for the surplus of time they expect to encounter in retirement. We often use Money Quotient’s “My Ideal Week in Retirement” worksheet to help Clients paint a picture of what their weeks may look like and to determine what the priorities in their life are.

At Yeske Buie, we often spend a lifetime with our Clients working towards answering each of these incredibly important questions. We employ an investment philosophy geared towards servicing your spending needs in retirement, continually run analyses to determine the “best” financial age to retire, and exploring what your ideal retirement looks like. Enlist the help of your financial planner to ensure you have the proper planning and support needed to make retirement one of the most joyous celebrations and phases in your life.

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“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? Your playing small does not serve the world. There is nothing enlightened about shrinking so that others won't feel insecure around you. We are all meant to shine. And as we let our own light shine, we unconsciously give others permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.” ~Marianne Williamson