Getting Real About Retirement Planning
Figuring Out What to Do and How to Pay for It
What Will You Do?A person announcing his or her retirement will be met with the inevitable question, "What are you going to do?" The responses generally fall into two categories: "I'm going to sit on my patio, drink beer, and do whatever the spirit moves me," or "I'm going to do all the things I would have done if I hadn't had to punch the clock every day."
Unless they have unlimited funds, the retirement candidates in either Column A or Column B are likely to be jolted into reality not long after the new phase of their lives begins. Sitting on the patio begets more sitting on the patio, often in isolation. The immense gratification stemming from the end of bosses' instructions, customers' demands, tedious commuting, and pitiless phones and e-mails wears off rather rapidly.
The sensible approach is to take stock of one's interests and ambitions while still working. Here are some considerations:
- Do I have a hobby that I'd like to pursue regularly and for a substantial period of time?
- Will my partner or friends be available for joint activities?
- Do I want to do volunteer work for a particular organization or cause?
- Do I want to learn a new skill like decorating or writing?
- Do I want to revive or strengthen personal relationships?
How Am I Going to Pay for it?Pervading all the previous considerations is a question that must be addressed, as they used to say in some voting jurisdictions, early and often. Early, because realism dictates that steps must be taken to provide the financing for the retirement years. Often, because changes in earning power, obligations, dependents, and interests all require adjustments, some painful.
The plethora of published retirement advice often contains such axioms as, "Start putting away money early" and "Put as much as you can into 401ks, college funds, etc". Unassailable as these pointers are, what can they possibly mean to couples struggling with household budgets or young professionals paying off their own loans before the breakthrough job? Here are some additional guidelines:
- Become very familiar with your employers' thrift and matching plans;
- Get something into these accounts regularly, no matter how small the amounts;
- Attend retirement seminars offered by employers and reputable community groups;
- Periodically review the frequency and magnitude of expenditures that may have become automatic but not essential, e.g., eating out, subscriptions, entertainment, electronic "toys," travel;
- Plow savings from these reviews into retirement funds;
- Assess the possibilities for part-time or consulting work during retirement and their realistic role in financing part of your retierment expenses;
- Update the likely costs of planned retirement activities like hobbies and travel and factor them into the plans for the amounts you will be able to tap.
The Bottom LineMany of these assessments cannot be realistically made at various stages of one's career. But whenever and to what extent they can be made, the chances for a happy retirement will be improved. It goes without saying that if there will be a partner in retirement, that person should be deeply involved in all elements of the planning. And that planning must be serious and realistic.
