Thursday, December 23, 2010

Is This Your Year To Retire?

It’s that time again when we all make New Year’s resolutions. It’s usually around losing weight, exercising or paying more attention to your family and less to your iPad or Crackberry. For many of us in the baby boomer generation, it also presents a time for us to think about that wonderful R word: retirement.

At the beginning of a new year, many of us may be entering or considering that next phase of our lives. The phase that we’ve waited for. The phase that we’ve dreamed of. The phase that we’ve planned for.

Wait a second, you haven’t planned for it? I’m not talking about just your financial plan. I’m talking about real retirement planning.

I’m a professional market researcher and focus group moderator who has interviewed thousands of individuals and professionals about retirement. When you discuss retirement planning, most people will mention their financial plan or having their “number” that constitutes what they need to retire. For most people, hitting this number and the realization that you can afford to retire is the end point, the goal.

Although having a financial plan and a “number” that provides the income you need is vital, the reality is that this is not the end point. Retirement is not just about having the right amount of money but having a plan in place regarding what you’re going to do in retirement. This includes not only planning for the fun things such as travel and babysitting your grandkids, but must include your plans for maintaining your health, having a positive mental attitude and being involved with the world around you. The goal is to thrive and enjoy a safe retirement.

Let’s start (and I mean start, not end) with financial planning for retirement. I like to call it your “financial preparedness” for retirement. Certainly it’s important to have a number that you’re working towards, or for those fortunate enough to have pension plans, an income figure that you know will be there. I hope that at this point in your life, you’ve taken the time to create a plan that identifies your financial needs in retirement. (For those reading this who are not close to retirement age, I’d advise you to use this year to resolve to get your financial plan either started or in good shape).

To touch all of the bases that need to be covered to ensure that your plan is up to snuff would be impossible in an article of this length. Get the books. Check out the websites. Make that appointment with a financial professional, if that’s what you choose. Whatever you decide, wherever you are in life, make the resolution to get your financial plan in place for retirement.

Planning for retirement is not just about knowing how much you need to retire, but it needs to consider your withdrawal plan or how you’ll pay yourself from that fund of money you’ve built up. I use a couple of guidelines that are worth considering. The first is to target an income that allows for 80% of your working life expenses. In other words, if you spend $80,000 a year now, plan to budget for 80% of that, or having an income of $64,000 during retirement.

Also, a good idea is to pay off that mortgage before you retire. That will provide you with additional income. That’s a good New Year’s resolution for people approaching retirement!

There are a lot of moving parts associated with creating an individualized financial plan, but another guideline to consider is the “expectation” that you can generate 5% off of your portfolio for income. There is also a theory out there, which has much merit, that the optimal number for withdrawals from your portfolio should be 4%. The point here is that financial planning for retirement is necessary and a very personalized process. If you haven’t done it, take it as a New Year’s resolution to do so, whether you’re retiring or not!

I understand that with many tools and resources available to us today, many of us would like to take this task on ourselves. I tend to believe that a professional such as a financial planner can be a good resource to help you, but whatever route you choose, the important thing is to create, maintain and frequently review a financial plan.

The problem for most people is that even if they do have a financial plan, and it may be a good one at that, this is often where they stop planning. If you come away with nothing else from this article, please understand that financial planning is only one step in the process of planning for a safe and successful retirement.

Having the money to retire is important, but how important is it if you don’t have the health you need to enjoy your retirement? That’s right, I wasn’t about to leave out that famous New Year’s resolution of taking care of your health. Many people see this as the most important aspect of retirement. How many times did your Uncle or Aunt tell you “if you don’t have your health, you have nothing”? They were right!

Let’s look at what it means to be physically prepared for retirement. If you don’t have thoughts about your health and wellness front and center in your mind, you need to change your viewpoint. For those retiring or in retirement, you need to resolve to have yearly checkups, a clear understanding of what your vital stats are and an exercise plan that you can adhere to.

There’s another one – the same old New Year’s resolution that you’ve passed over each year – exercising. Well here’s a news flash: you can read all of the magazines and books you want, the bottom line is that for retirees, exercise is NOT an option. You’ll have the time, you need to do something: walking, treadmill, swimming, whatever. It’s also a great way for you to create a schedule for yourself and a healthy way to interact with friends and heck, even your spouse.

Just as you created a plan for your financial needs, you need to do the same for your own physical wellbeing. Once again, this is very personalized but it should include the following: regular doctor visits, exercise, recognizing that you are what you eat (you need to consider the kinds of food you ingest and your frequency of alcohol consumption), take your vitamins, staying mentally active (crosswords, reading and taking classes are great ideas), and most important, just relax.

You’re probably in better shape than you think. Retirement is about enjoying yourself, not creating terror when you have a doctor’s appointments. If you resolve to plan on staying healthy in retirement, you’ll be more likely than not to enjoy a safe and healthy retirement.

Just as we’ve planned for our physical health, we need to take a good look at our mental attitude as we plan for, and enter retirement. As we retire, we leave the routines and people that we’ve come to know in our working lives. As I said, many people simply view the time of retirement as a goal and without planning about what happens after we announce our retirement. Then that first day comes when the alarm clock doesn’t go off and many people are in for some serious “confusion”.

We have all heard the stories about the new retiree who now spends their time getting in the way of their spouse at home. The spouses fight and ultimately one of two things happened: they either kill each other or one spouse has to go out a find a part time job. This is retirement? This happens all too many times and it’s all due to a lack of planning and more importantly, a lack of communicating.

As you plan to retire, you need to sit down with your love ones. If it’s a spouse or significant other, you need to discuss what you’ll do together now that you have all of this time together. You need to find a plan and schedule that works for both of you and is respectful of each other’s activities and interests. You should also sit with your family and discuss how this may impact them. Being the grandparents who are always over because they have nothing else to do is not going to work. What does work is asking them how you can be involved in their lives now that you have the time.

Retirement will be a great time. It will also be a time when you’ll experience loss as you’ve never experienced it before. You’ll lose old friends and family members. This will be very hard on you. Unfortunately, it’s something you need to plan on. It will be very important that you maintain as upbeat and positive an attitude as possible in retirement. Heck, it’s what you’ve been waiting for your whole life. Even with the pains, it can be the most enjoyable part of your life.

If you’re nearing retirement, resolve to do the following: sit down and write down what you envision your retirement to look like. You should then store this document in a drawer and take it out often during your retirement to see how you’re “doing”. When you prepare this document, think positive and optimistically as well as spend some time preparing yourself mentally for the good and bad things that can happen in retirement.

Quite often our ability to stay positive and prepared for the good and bad that will happen in retirement will bring us back to our spirituality. Retirement can be a great time to more fully explore your spirituality. This can include becoming more regularly involved with your church or even taking the opportunity to visit other houses of worship with friends. I’ve heard of retirees discussing the benefits to their own spiritual journey of attending services, or reading about beliefs of other religions. Retirement is a time of exploration, not a time to be closed minded and “set in your ways”. When you resolve yourself to keeping an open mind and positive attitude in retirement, the rewards will be great.

This leads into the last element that you need to plan on for a safe and enjoyable retirement: how will you stay involved when you’re retired? Retirement is not about sitting on the couch with the afghan watching old Roseanne episodes (I know, that disappoints me as well). Get your butt out the door and interact with the world around you!

This is retirement after all. It’s your ‘free’ time, go and enjoy it. Sure, take trips, spend time with your family and heck, sleep late when you want. Just be sure that you also stay involved with the world out there!

This is not just about planning how you’re going to spend your time each day, but now that you have time available to you, you need to think about how you can use this time to impact and improve things for others. Because believe me, the reward of improving things for others not only make you feel good, but you’ll feel rewarded as well. How many times did you say when you were working, that it wasn’t about the money, you just wanted to be recognized and feel rewarded for your hard work?

The reality is that you can now do this. In fact, you can get this in spades now that you’re retired. How to start? Why not think back to all of those organizations that you gave money to last year? All of those mailings that you received in December asking for your “membership” or donations include organizations that would LOVE to have you be actively involved with them.

Talk to your friends or spouse and identify organizations that you’d enjoy helping and contact them. It’s not that difficult. There are online resources available to connect you with local organizations looking for volunteers. Sometimes the best place to start is with your own church. Wherever you start, the important thing is to do something! This will provide you a routine and a connection that will not only replace what you had in your working life, but is something that you can control and you’ll be in charge of the time commitments that you make.

Retirement is a time to enjoy yourself and do the things you‘ve dreamed of doing. You’ve earned it!

So as the New Year brings another round of resolutions to make and break, I hope that if retirement is a possibility for you in the next year or two, you’ll take the time to think about and plan for the four aspects of creating a safe retirement: financial preparedness, your physical wellbeing, mental attitude and staying involved.

As the year begins, make a resolution to take the time to plan for each of these aspects. Taking the time now to do that will reap huge rewards done the road.

Oh, and while you’re planning to do this, have that donut or piece of pie that last year’s diet resolution wouldn’t let you have. I won’t tell.