Thursday, December 20, 2012

What will you retire to? Lifestyle meets finances

Recently my brother asked me what hubby and I thought we would do when we retired.  I answered that we had a vary vague picture of that as it was 5 years out for hubby and until then we would be continuing along as we do now assuming no major unplanned life upheavals.  My brother and his wife are older than we are and have both officially retired.  They are just starting to think about how they will spend their time.  My SIL will do fine as she is high energy and highly social. My brother continues to work as a consultant. They both help my 91 year old mother a lot. They will figure it out although they didn't plan it in advance.

I think that for most people pre-retirement planning tends to focus on the finances and not on what you will be retiring to.  Leaving work means leaving structured days, possibly purposeful and rewarding activity, lots of social contact and perhaps intellectual stimulation.  How to prepare to replace all of that?

Our plans are vague for our official "retirement" in 5 years when hubby turns 65.  That is when hubby expects to leave his current job and his plan is to move somewhere and find a new job. In fact a few days ago he asked me if he would need to earn the same amount from 65 to 70 as he earns now! He does love his work and I do think part-time work will make him happy. I'd like the flexibility of his working part time or on a project basis so we could travel more as a couple but we'll see what happens. I am already semi-retired/working part-time and am experiencing some of the challenges of moving into a non-working lifestyle. I'm not alone - it was a topic of conversation at my book club this week.

So what will we be retiring to? It will have to be a combination of financial capability and desired or necessary lifestyle decisions.

I recently received an email from TIAA-CREF which contained the following key lifestyle questions as part of an article on financial planning checkups. As they said, it’s not easy, but you should factor lifestyle issues into your financial planning. To get started, here’s their suggested checklist of questions that you can copy and paste, and then modify with your own specific questions. Of course it is the answers that will matter the most!

__In addition to my retirement, what financial issues do I need to consider in balancing multiple goals over time, such as funding education for children and grandchildren, caring for elderly parents, and providing a legacy for my family and charitable organizations?

__What’s my target date for retiring? Will I be ready to leave my job? Will I work part time? Once I’m retired, if I underestimated my lifestyle needs, what next steps should I take?

__As I near retirement, are there questions I need to be asking about transitioning to healthcare coverage for retirement years, election dates, continuation of coverage for my spouse or other dependents, costs?

__Based on the lifestyle I want in retirement, what’s the best time to apply for Social Security and Medicare? How do I start that process?

__Where will I live, and do I want to downsize or upsize?

__What will I be doing once I retire, and what’s the cost associated with that? Can I actually afford to retire and do all that I want to do?

__What are my options for receiving income that best meet my lifestyle needs, including when to take required minimum distributions?

__What are the tax implications for the lifestyle I want to lead?

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