Thinking about retirement might seem like a giant elephant sitting there on the end of your fork—you know getting it down is not going to be pretty.
So take a step back and start thinking small. Your life—including your financial life—is comprised of many, many pieces.
Maybe you’re dutifully contributing to your 401(k) or other retirement plan. You might be saving and investing in addition to that. You might even be increasing your contributions as your earnings go up. The road from your work life to your retirement life might seem straightforward, but that distant horizon smooths out the potholes, ravines and other hazards ahead.
Or perhaps you’re just not there yet—your budget has too many outs and not enough ins to save regularly. Maybe your lifestyle has crept up faster than your income.
As you draw nearer to retirement, you might start to consider how much Social Security is going to add to your income and when is the right time to start taking benefits. You might be thinking “as soon as I can since I don’t know how long I am going to live and I’ve been paying in all these years and I want to get it back as soon as possible!” But what could await you is a sizeable tax bill and permanently lessened benefits over your lifetime.
During your years of employment, you’ve been covered under a company health benefit plan or purchased from a menu of plans that offered you choices of varying coverage levels and cost. When you hit 65, Medicare becomes your primary coverage and if you’re still employed, your company plan typically becomes supplemental. If you’re not employed, you will have to choose from an alphabet soup of Supplemental choices. Benefits and costs vary widely and you’ll need to consider them carefully against your financial ability and family needs.
Your workplace might have provided free or supplemental life insurance; in addition, you might be carrying additional coverage for your family. As your employment ends, your life insurance most typically terminates (unless it is portable). If your coverage is term insurance, the benefits might scale down to zero or a modest flat benefit. Your personal coverage, depending on the type of insurance, might be renewing at a higher premium or even terminating.
You may have been living on a paycheck arriving in your hot little hand/bank account every two weeks, but when retirement arrives, the paycheck stops. Unfortunately, the bills don’t. Managing a new way of budgeting can be challenge if you haven’t had to adjust your habits in 30 or 40 years.
These are just a few of the many adjustments to contend with when retirement arrives. Your needs, decisions and choices change, along with your lifestyle and maybe even where you live. Certainly, the alarm clock plays less of role in your life, but the discipline and structure of work is now gone, leaving an empty canvas of time that you get to fill.
To get through this huge transition, divide your areas of concern into segments and then start gathering information. Look for professionals who can help you navigate the areas you’re worried about. Create a plan that encompasses all your stakeholders, and work from big ideas down to small details.
You’re not the first person to navigate the journey into retirement, but your transition is yours alone. While the experience of others might be helpful, it doesn’t necessarily mean their choices are the best solution for you. So listen, gather information, ask questions, work with professionals, talk with your family and break each aspect into retirement into small, understandable action steps.
Some of it might not taste great, but when eating an elephant, you just need to get one mouthful down at a time. Bon appétit!
