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How Do You Retire with Confidence?
Updated on: December 2022
Written by: Eric Gaddy
You’ve worked and saved for 35+ years and now it’s time to retire. Your heart says yes but in the back of your head there is doubt.
“Will I outlive my money?” or “Do I have enough money?”
Retiring is a huge decision. Don’t just wing it or have the “I’ll deal with it when the time comes attitude.” Retiring with confidence means to eliminate as many of the ‘unknowns’ as possible. The goal is to retire without worry. Worrying about money when you are working is not fun but it’s really not fun when you retire. Have a plan. With a well thought out and constructed plan, you’ll have those answers in front of you. That plan does not have to be complicated or confusing.
Find What You Need
Know Your Numbers
“Nobody cares more about your money than you do.”
If you don’t have an intimate relationship with your money, then it’s time to get one. It amazes me how many people put their retirement plan on autopilot and figure if they keep “socking away” that everything will just take care of itself. That approach might work if you’ve “socked away” a substantial amount of money, however you won’t truly know until you do some planning. On the other hand, maybe you’ve over saved for the retirement lifestyle you want, and you can retire sooner.
There is an old saying that people spend more time planning their annual vacation than they do planning their retirement. In my experience, that is a true statement. But it’s not too late to reacquaint yourself with your money. Grab your quarterly statements, dust off and update those old spreadsheets and get back to crunching your numbers. Knowing where your numbers are today are going to help you plan for your future retirement.
Using a financial advisor can be great if you’re too busy to invest your money on your own, but don’t just write a check and walk away. You want to be engaged in the process. View your relationship with your financial advisor as a partnership. Don’t disconnect and tell them “You handle it.” This is a mistake I see many folks make. You work the majority of your life, saving and investing money with the end goal being retirement but then you put all of your hard-earned money in the hands of a someone you don’t personally know and only check on your money occasionally? WRONG. Stay involved with your money. Know how much risk you are taking, know if your funds are outperforming their index, know the fees you are paying, set goals and be sure you are hitting them. Get involved and stay involved with your advisor and your money.
What will you be doing in retirement? Are you going to travel the world? Buy an RV and roam around? Relocate to different part of the country to be closer to your grandchildren? Or stay where you are and invest in a hobby.
If you have plans for drastic changes in retirement, then you are going to want to know what that lifestyle is going to cost you. Start doing your research now so you can plan accordingly. Again, retiring with confidence is about trying to eliminate as many of the unknowns as possible.
For most people their lifestyle isn’t going to deviate too far from when they were working. There might be a part-time job or a new hobby but with little change to their monthly budget. This makes their retirement planning a bit easier.
If you have big plans in retirement, make sure your new lifestyle fits your budget.
Addressing the ‘What If’s’ in Retirement
We’ll never be able to predict if an event may or may not happen in the future, but we can prepare for some of the possibilities. It is important to determine what ‘what if’s’ will impact you the greatest and include them into your plan. Plan on an emergency fund to handle the smaller ‘what if’s’. These are just some of the forward-looking questions folks approaching retirement ask themselves:
What if the stock market takes a dive early in your retirement?
Will this alter your withdrawal plan?
What if you need assisted living in twenty years?
Should you look at long-term care insurance?
What if taxes are dramatically higher in the future?
How will this affect your income?
What if inflation stays historically high?
How will this erode my purchasing power in the future?
You Have a Retirement Plan, Right?
A hope and a prayer is not a retirement plan. A true retirement plan is one based on your real numbers such as your debt, how much income you’ll need and can generate, your current assets and the cost of your lifestyle.
Your retirement plan doesn’t have to be a 125-page, $3000 binder that you paid a financial advisor to put together for you. What it needs to be is a carefully thought-out process that includes all your needs and that they are going to be met over the course of the coming decades.
Retiring with confidence isn’t always about your financial numbers. You want to make sure you are mentally prepared to retire. When you arrive at retirement and you know your financial numbers are in order, actually taking the step to retiring from your job might be a little more difficult than you thought. You are about to let go of relationships, a routine and a schedule that you have gotten used to over the years. The hardest is an identity. You might have been VP of Sales but once you retire, that title is gone.
Most folks aren’t going to have much of an issue with letting go but many will. Make sure you are mentally ready.
You’ve worked for a lot of years and have saved and invested for the moment you can retire. Make sure your financial numbers are where they need to be. Address some of the risks that might be ahead. Get mentally prepared. Enjoy the lifestyle you’ve planned for. When you feel good about your numbers and are mentally ready, rest assured, you can retire with confidence.
How to “Retire with Confidence?”
When I wrote the book “Retire Early: What are you waiting for?” I created a process called D.I.A.L into Retirement. D.I.A.L is an acronym for Debt, Income, Assets and Lifestyle and when you get these four items in sync, you can retire with confidence at any age. What does an ideal D.I.A.L look like?
Debt: Completely debt free would be ideal however a small amount of lingering debt isn’t tragic.
Income: Having multiple streams of income is best. Income sources such as social security, a pension, rental income, an annuity, withdrawals off of your brokerage accounts and IRA’s are diverse and allow you great flexibility in retirement.
Assets: Your assets are there for a few reasons. 1) To create an emergency fund for those unexpected expenses. 2) To set aside money for future expenses such as a new car or new roof on your home. 3) To generate income off your assets.
Lifestyle: Your lifestyle is your monthly expenses. How are you choosing to live life in retirement and what is that costing you? In an ideal world, your net monthly income is greater than your monthly expenses with a cushion left over.
When your relationship with your money is strong, you know your numbers and your D.I.A.L is in sync, then you can retire with confidence.
Content on this site is for reference and information purposes only. Do not rely solely on this content, as it is not a substitute for advice from a financial advisor or accounting professional. Aging.com assumes no liability for inaccuracies.