Financial Life Planning As You Approach Retirement

As you transition from mid-career to late career, your financial life planning and retirement planning need to go into overdrive.

Most professionals engage with a financial life planner to start planning for their retirement in their 40s and 50s, and a few even as early as their late 20s to early 30s. But we also get a significant number of clients in their early 60s who come to us looking to either finally start their retirement planning in earnest, or to review and update a retirement plan they haven’t looked at in awhile.

Our typical client approaching retirement has reached a high point in their career and generally has a very high level of income. They’ll also very likely have amassed significant personal assets, whether it be an after tax investment portfolio, real estate, or equity in a business or corporation.

While they might have retirement accounts with large balances, at this stage in their careers it’s generally not as much about how they can maximize their retirement investment returns. Instead, they approach us because they desire to finalize a plan on how to actually use their retirement funds.

Financial Life Planning Just Before You Retire

First there’s the realization that within a few years, you’ll no longer be doing your present career on a full time basis. It could be a personal decision—mabye you’re finally ready for something different. Or it could be due to an increased risk of layoffs for older workers.

You might be used to being in a position of leadership and authority which will end when your present career ends. You might be transitioning to a part-time or consultancy role. You could be switching to a venture based on personal hobby or passion. Or you might have decided to completely stop working and start enjoying life to its fullest.

This stage of life won’t be without its own set of potential financial challenges. First is familial: You might have adult children who need a bit of extra financial runway to get established on their own careers. If your children move further away, you’ll now need to spend more on travel to visit them. There’s also the possibility of needing to provide for the care for elderly parents as well as possible increased medical expenses for ourselves.

Finally, some clients come to us to update a retirement plan that needs to change due to a middle age or “gray” divorce.

The Non-Financial Challenges of Retirement

Aside from the obvious question of retirement expenses versus available funds, there are also some non financial factors to consider.

Emptying The Bucket List

The first non-financial challenge of retirement planning is the one most often overlooked- the simple matter of day-to-day life. Part of the fun of retirement planning is the chance to do fun things you’ve wanted to do, including travel, finding a new, interesting place to live, and spending more on present hobbies or discovering new hobbies. Doing these things can actually cause your initial retirement expenses to be higher than your pre-retirement expenses as you embark on these trips and purchases.

But once you’ve visited everywhere on your list and done all the big fun things, what now? You’ll need to find a new daily routine now that you no longer have the full time work routine. This change is often one of the things retirees don’t anticipate—the adjustment to a new day-to-day routine of retirement.

The Retirement Age Gap

If you are married, it’s likely your spouse won’t be the same exact age as you. In fact, they could be significantly older or younger. They might be at a different point in their working careers and not quite be ready to retire yet, or they might already be a stay-at-home spouse.

It’s also very possible they will have different views on what an ideal retirement looks like. Also, when one spouse enters retirement, not only does the income dynamic change, but so does the day-to-day routine and dynamics between the couple.

Your Bank Account Turned Upside Down

With retirement comes reduced or no income. You won’t be making what you were making before and won’t see the paycheck deposits into your bank account. Instead, your financial world flips upside down as you start seeing the opposite: large, regular withdrawals from your accounts.

This can have a jarring effect on the psyche. As you watch your accounts steadily decrease, it’ll be natural to wonder if it will be enough. Can I do everything I want to do in retirement? Should I cut back? What if I have a major unexpected expense? Will I need to go back to work again?

With questions like these in mind, it can be easy to get caught in an endless cycle of agonizing whenever there’s a major expense to consider. And even if you have saved wisely for retirement and made good financial decisions, there’s still a tendency to wonder if you did well enough.

A Financial Puzzle to Solve

Adding to the mental challenge of retirement spending will be trying to crack the financial puzzle of how exactly to use your retirement savings. You’ve seen your investments grow and accumulate over the decades, but now you’ll need to start selling them off. Mentally it can be hard to let go of a successful stock or mutual fund, especially if it’s continuing to do well.

Deciding what to sell and when—a positive action that will give you money to spend—can be just as agonizing as deciding whether you can spend money.

That’s why having a financial life planner—a trained and experienced professional whose sole focus is to help others optimally plan for retirement—can make a great impact to help you deal with these challenges.

Helping You Create Your Best Retirement

First of all, we here at Financial Life Focus are fee-only. We don’t make any commissions from buying or selling. This way,  we can focus on what’s best for you, not what generates more transactions or has a higher commission rate.

Secondly, but just as important: as fiduciary agents, we are sworn, legally required, and committed to doing what’s in your best interests. We regularly take mandated training to keep current on financial laws, what’s new in the industry, best practices so we can be at our best for our clients. We keep tabs on the latest financial news and trends and curate what’s most important and relevant to you.

Third, as financial life planners, we plan with your lives as the focus. We’ll work with you collaboratively to help you come up with not just a spending plan, but a living plan that lets you enjoy your retirement to its greatest potential. We’ll take what you want to do and not just say if you have enough, but give you the optimal way to do it and find alternative solutions if needed.

So, even if you just have a few years before retirement, it’s not too late to get started.