put them down on paper. Until you know what you want or need to do in your various retirement phases, you can’t adequately plan for your retirement needs.
Issues to Consider
You’ll find that many questions come to mind, and you’ll need to be aware that the different stages of retirement come with different questions. Here are a few issues you may find yourself considering:
Active retirement years
• How much do I need for retirement living?
• Can I afford to retire?
• How will my retirement plans affect my loved ones?
• What will be my sources of income?
• Where should I live in my retirement years?
• How will I preserve or even grow my capital?
• Have I considered how I might save money after retirement?
• When would I like to retire?
• What would I like to do in my retirement?
• Will I continue working part-time during retirement?
• Will I start a part-time business?
• Do I want to travel? (If yes, to where, for how long, and how often?)
• What hobbies or personal growth would I like to pursue?
• Are there volunteer activities I’d like to pursue?
Semi-active retirement years
• Do I wish to keep my home or sell it and downsize?
• How do I plan to preserve or even improve my health?
• Do I wish to spend more time close to home with family and friends?
• Are there volunteer activities in which I’d like to become involved?
• What household jobs might I hand off to others at this time?
• Would I like to have the option of hiring some household help?
Passive retirement years
• What kind of housing do I think I’ll need when this time comes?
• What kinds of activities will I be able to continue to do to keep me involved in life and my community?
• What kind of care or assistance from others do I imagine I’ll need?
• Are there other people in my life who might be willing and able to assist me?
• What programs are available through my community or government to make my life easier at this time?
• What legacy do I want to leave behind?
Give some thought to each of these questions, and understand that there may be no simple answers. If you are part of a couple, discuss them with your spouse. Once you’ve taken some time to consider all aspects of your retirement, you’ll be ready to move on to the next step: getting your goals down on paper.
Retirement Goal Setting
Online at <www.self-counsel.com/updates/after55/bonus.htm> you’ll find the Retirement Goal Planning worksheet (Worksheet 1). Use this worksheet to list your retirement goals. If you are part of a couple, complete the sheet together. It is a good idea to revisit your goals yearly and revise them where needed.
Take a look at the example of Joe and Martha in Sample 1, at the end of this chapter. Both are in their late 50s. Joe wishes to retire immediately, whereas Martha plans to continue working until she reaches age 62, which will happen in another five years. They are both in good health and are looking forward to a long and fulfilling retirement.
You’ll note they’ve thought through all three stages of their retirement-living years, and that they’ve included more detail on their worksheet for their earlier years than their later ones. You may find that such is the case for you, too. That’s quite acceptable, because your goals may change or evolve over time. You will be identifying your later years’ goals now only for reference and general planning purposes. No one can realistically predict what will happen 20 years from now. Just make your best estimate at this time so that you have an idea of what’s likely to take place in your future retirement years. Then, make it a point to revisit your goals each year and revise them as needed. Keep in mind also that in addition to changing your goals when it makes sense, you may need to modify your lifestyle to accommodate your new goals.
Making these changes is crucial. You will be developing a financial plan based on your goals. Identifying changes in your goals in advance will allow you to make the corresponding changes to your budget, thereby assuring yourself that you’ll continue to successfully fund your retirement. You’ll find that doing this alleviates much of the stress associated with retirement, as you’ll have the security of knowing that your resources are likely sufficient (barring a catastrophe), no matter what stage of retirement life you’re living.
In future chapters, you’ll identify where your retirement cash inflows will come from and how much money you can reasonably expect to have. (Remember that cash inflows include any income streams you may have, as well as any cash you may realize from other sources, such as selling your car or cashing in your bonds.) You’ll also learn how to make certain your retirement cost is less than your retirement income. This is what is meant by living within your means — the art of living on less than what you bring in.
Once you’ve identified your retirement goals for the different stages in your retirement years, you’ll be ready to take an inventory of where you’re at, financially, right now. Calculating your net worth is necessary — and it’s the topic of the next chapter.
Sample 1: Retirement Goal Planning
3
Calculating What You Are Worth
In dollar terms, how much are you worth today? If you had to make a comparison between your financial situation today and your situation as it will be ten years from now, or as it was one year ago, would you know how to go about doing it? This chapter will take you through a process called the net worth calculation, by which you can answer these questions.
This step is a crucial one, as it helps you to see where you’re at financially today. To put it another way, if you sold all your valuables and paid off all your debts now, what would you have left? The amount left is your net worth today.
The calculation serves as an objective
