Financial planning for retirement, or “post-retirement planning,” doesn’t end once you retire. Even if you have accumulated enough money for a secure retirement, your plan will require ongoing checkups to confirm that everything is going smoothly.
You will have to continue to make changes and adjust your plan as time goes on. Retirement can last as long as one-third of someone’s lifetime, as medicine, wellness, and technology have seen tremendous progress in recent decades.
In other words, having an ongoing plan for this phase of life is quite crucial. You may also experience more changes in retirement than you have previously, as your abilities and health evolve over time.
Your retirement planning strategies will need to be reviewed and updated on an ongoing basis. Conducting annual reviews of your financial plan, at a minimum, and making changes as necessary is a solid course of action.
Here are some ‘moving targets’ that are likely to change in your retirement years.
Retirement means that you are going to stop working — or at least working full-time in your primary career.
You will have many more hours in the day available for various activities. Now it’s a matter of figuring out what you would like to do with this free time.
These questions might help you decide how you can make the most of your new lifestyle. Will you work part-time? Do you have any passions that are related to your field of expertise that you might wish to pursue now?
Do you want to start a business? Want to become involved with a hobby that you kept putting off until you had more time and money to pursue it?
If you have always wanted to play with model trains, then that could be an activity that you spend time doing. If you want to stay socially connected, you might consider networking with a group of other retirees with a similar interest.
There are few limits on retirement pastimes that you might pursue. You could do something charitable, like join the Peace Corps and teach students in a foreign country.
Perhaps your church has a need for a volunteer to do administrative tasks. Or your local animal shelter might be looking for a part-time employee. There is any number of charitable causes that you can join, if you are so inclined.
Consider doing a “test drive” on these activities for a few months before your actual retirement date. This can help with your decision-making of how you want to spend your time.
Since you probably won’t be working in a full-time capacity anymore, your income will probably change to some degree. If you have socked away a substantial nest egg, you might be able to retire at the same income you took home during your career — or perhaps even higher.
But many retirees will see a change in income after they stop working. Not only that, how they receive income will change, as Social Security and other new income sources replace the career income of bimonthly paychecks or earned income from a business.
You will need a practical plan for cash-flow and spending that accounts for this life shift.
Don’t forget about “crisis” events that can substantially disrupt your budget, such as a hospital stay or the need for long-term care. There are many ways you can prepare for unexpected situations like this.
You may want to consider purchasing a life insurance policy with accelerated benefit riders that can pay out if you become incapacitated.
These policies have a built-in advantage over a traditional long-term care insurance policy. If you never need to access the accelerated benefits in the policy, then you still have the cash value and death benefit available to you.
Ultimately, the amount of income that you will need depends on your retirement activities. Many retirees actively pursue their lifelong-held goals in the early years of retirement, when their health and energy are still strong.
These goals can vary from second-career acts to traveling, which bring new expenses into the fray and require income streams to cover them. As you progress along in retirement, your activities will usually tend to decline. That means your need for annual income might go down as well.
Data from the U.S. Bureau of Labor Statistics supports this trend, with household spending declining with age. However, certain parts of your retirement spending are highly likely to go up, which brings us to the third moving target.
Healthcare and Medical Services
If it makes sense for your situation, you should have some sort of insured solution for long-term care. One such solution is a life insurance policy with living benefits, as mentioned previously.
If you decide to buy a pure long-term care policy, be prepared to have the rates increase on a semi-regular basis. This will be in response to the cost of this type of service continuing to go upward.
What about out-of-pocket expenses for healthcare? If you are concerned about those, it’s wise to purchase a supplemental Medicare policy that covers most of the bills that Medicare won’t pay.
Your Housing Situation
For many, “aging in place” in your own home is a major objective in retirement. However, not everyone’s housing situation will be the same.
Some retirees may move into assisted living facilities or retirement communities once they reach their 80s. For others, downsizing from their current home to a smaller property may be an attractive option to reduce housing costs and property taxes (especially when their tax burden is already considerable).
A reduced burden of home maintenance and repairs may also be attractive for downsizing.
No one likes to think about their mortality. However, if you have a spouse, one of you will live longer than the other. At some point, the surviving spouse will need to rely upon your accumulated retirement assets to provide ongoing income for living expenses.
How can you be ready for this question of spousal survivorship? Having a plan set that accounts for these potential changes — and possible changes in health for the surviving spouse, including mental deterioration where decision-making ability declines — is a prudent course of action to pursue.
Life insurance may be necessary in order to ensure that a spouse will have enough money to live on.
The death benefit proceeds can fuel a new pot of money for the surviving spouse to receive income. Depending on how much life coverage you need, you can choose either a single-pay life insurance policy where you are ready to go with a one-time upfront premium. Or you can opt for the flexibility of a policy with multiple premium payments over time.
You can also structure the payout options on an annuity contract so that you both receive guaranteed income for the rest of your individual timespans. There are a variety of choices here, from single to joint life payouts.
Your financial professional can walk you through the pros and cons of your options.
Post-Retirement Planning Isn’t a One-and-Done Process
Planning for retirement is an ongoing process that you will have to do for the rest of your life. Once you stop working, you will experience many changes and a different set of circumstances.
You need to be prepared to face elder age and be able to cover your expenses during your non-working years. Consult your financial advisor today about your retirement if you haven’t done so already.
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