Many folks facing retirement don’t start to think about things they want until they are retired. They just keep working and going about their daily lives and say to themselves, “I’ll get around to it someday when I retire”.Well, waiting until you retire may be too late! We often explain to clients that you need to start forming a plan for retirement somewhere between 1-5 years before you retire. It’s not just a question of money, savings, and cash flow in retirement. It’s also about what you expect your retirement life to look like after you don’t have to go to work anymore as part of the daily rat race. Where do you want to live? Do you still want to drive? Where’s the local library? How close are the local grocery stores? Who will be my doctor, and will they accept my medical insurance? The bottom line for these decisions…. what’s important to you?
Cliff and Abby, who we advised for several years while leading up to retirement, suddenly decided to move to the beach! They had vacationed at the beach off and on for several years, staying a week or two at a time. They were thinking once we move there the kids and grandkids will visit more often and we will love living there. Well, after selling their home and moving out of state, they came to discover that full-time beach living was not what they thought it would be. There was constant maintenance on the small house they had bought due to the salty sea moisture that seemed to coat and corrode everything. The couple was working far harder in their retirement than they had planned. Also, the kids and grandkids could come for a visit but since they now lived further away, the kids could only visit during the school holidays. So now they saw them much less than when they lived close at their old house. A few years later they sold the beach house and moved back closer to the family. The beach house was a fun idea but in reality, it turned out not to be the right choice for their retirement for what was important to them.
A positive side effect of moving twice in a short period of time was that they were able to downsize and get rid of many items they hadn’t used in years.
Another thought is that if you wait until full retirement to start planning, there may be options that are available now that won’t be in the future. Maybe there is a certain area you want to move to for retirement. What if it’s sold out? That’s no longer an option.
If you still have all your retirement money in a 401(k), 403(b), money market, or IRA, what happens if the stock market has a sudden drop like in 2001 or 2008? All of these types of fund vehicles are tied to the performance of the stock market. If there is a sudden large drop right before you retire, now you’ll have to work more years to recoup what you lost! You need to start moving your retirement funds into retirement vehicles that won’t leave you exposed to the whims of the market. The risks that can affect the stock market are many and include political risk, international risk, systematic risk, or unsystematic risk. These are just a handful of reasons the stock market can have a sudden shift, causing you to lose valuable retirement funds.
Where to go? What to do? You can avoid these issues by preparing now and start making plans and corrections to avoid these pitfalls! Call us! We can help!