Planning for a successful retirement is like any other type of financial planning, in that it is an ongoing process, and it takes time. Depending on where you are in the planning stages, is key in determining how much time you want to allow yourself. Aside from that, there are several important areas that you want to address in your planning journey.

Everyone’s planning picture is different, in having different needs, parameters, expenditures, investment assets, family dynamics, retirement lifestyle preferences, ambitions for retirement, etc. Therefore, it is important that a planning process is applied, and the proper tools are used to make sure you have effectively considered all of the vital areas, and to make sure your plan is addressing your life in retirement in a way that is aligned to what is important to you. That being said, here are some areas and tips to consider for your planning journey.

Painting Your Retirement Picture – Determining how you want to live your life after you make your transition from a regular career schedule and into a more leisurely, free going lifestyle, may take some considering. Even though it is an exciting chapter, when you are replacing your income by receiving a paycheck, and converting to receiving a “playcheck”, the human and emotional side of you, needs to be thought about. What do I mean? Well, all of us need a life that is filled with purpose, meaning, a sense of making a difference, and having a sense of accomplishment. It’s is what makes us happy as individuals. Aside from our health, we need all of this in our life, and to exist in a way that gives us significance. In retirement, this may include starting another career, learning something new on a regular basis, taking meaningful trips to different parts of the world and experiencing the people there and perhaps serving them, giving your time towards causes you care deeply about, mentoring, serving on boards, growing and studying your faith, engaging in efforts that positively impact your community, family, etc.

There are a number of exercises you can utilize to help you explore this area. Our firm has developed a discussion platform called “Purposeful Conversations” that separates your picture into three general areas, one them addresses your pursuit of life fulfillment and happiness.  That being said, simply planning to play golf a couple of times a week or planning your next trip, won’t likely complete your sense of fulfillment, with the absence of your career. So, this may be an important area to address.

Determine your cash flow requirements during your retirement years. This is basic step within the retirement planning process. Collecting spending data on recurring monthly expenditures, expenditures that will go away, major expenditures that will be required or you have planned, major expenditures that could occur, medical expenses, charitable gifts, etc., all will help determine your income requirements, and will be compared to your income sources and investment savings balances.

Think through Inflation Assumptions – Different expenses inflate at different rates. But generally, inflation is a potential enemy to a retiree. Determining an overall inflation rate in your scenarios is important, but also be mindful of addressing particular areas such as health care, education, and so forth.

Your Sources of Income – Determining your sources of income including pensions, social security, passive income from real estate investment property, and investment portfolios, will be of importance. Also, the election options on a pension or social security, for instance, should be evaluated. When to take Social Security and how each option will impact your outcomes is important. Pension options as well, whether to elect single life expectancy, joint life expectancy or a lump sum roll over can have a significant impact on your retirement. Also, getting a good idea of what your marginal and effective tax brackets will be in retirement is an important factor related to income planning.

These four areas are vital to address in developing a sold retirement plan. Once the data is established on paper, it is a good foundation for an in-depth discussion and the creation of your retirement scenarios. I will discuss nine other critical areas that may be included in your retirement plan in Part 2 of this discussion.

Feel free to email me with any questions or would like any material on this discussion.