Originally published in the News Star and the Shreveport Times on Sunday, December 11, 2016.
Q: My husband and I are within ten years of retiring. We both work and plan to retire at the same time. I think we need to save a lot more money and he says we need to enjoy it while we have it. Who’s right?
A: Good question.
For many the final ten years of a career are truly the “definitive decade” when it comes to retirement planning. Here’s why that is true for so many:
Your retirement is close, so you take it seriously. Before you turned 50, you were going to be young forever. But something changed at 50, didn’t it? The end of your career was now closer than the beginning. And some of those folks you know who are now retiring – you knew them when they were young! Preparing for retirement no longer seems like something you can put off. It’s almost here, and…
Your career is mature, so you make more money. You probably never thought you’d be making this much money. On the other hand, you’re shocked that someone could run through this much and have so little to show for it at the end of the month. But when you are honest with yourself, you know that with a little forethought, you could probably save a good bit, in light of how much you make. And because…
Your family has grown up, therefore expenses have gone down. For many, the kids are grown and (mostly!) gone and no longer a regular line-item in your checkbook. Even if you do have grandchildren, they’re more fun than expensive when you add it all up.
The above three items mean that many in their last ten years of work have both the focus and the facility to make up for lost time in retirement planning, If that’s you, here are some action steps to consider.
Make an honest appraisal of your current condition. You cannot move forward until you know where you are. How much do you spend each month? When will the mortgage be paid off? How much have you saved into retirement accounts such as 401Ks? What are you scheduled to receive in Social Security benefits when you retire (check that out at www.ssa.gov)?
Identify the retirement life you want. For most, the basic desire is for retirement life to not require too many financial changes. We want to live a similar lifestyle as we currently live, absent the work and adding to that some fishing and traveling.
How much income will that require? Where will that come from? And how will you handle things like the need for new cars, roof repairs and replacing the air conditioner?
You’re going to need both assets and income during retirement. Knowing how these need to be balanced is crucial if you want to aim for a realistic target.
Craft a conservative path to get there. Once you’re identified the lifestyle you want in retirement and estimated the income and assets required to have it, you’ve got to figure out what it will take to get there.
So you’re really working on an equation with four major components: the size of your retirement lifestyle, the assets you currently have, the savings you can muster between now and then, and how long you have to keep at it to reach your goal.
Remember these components are all interactive – they affect and impact one another. If you already have $1,000,000, you may not need to save so much. Or if you want to retire sooner, you will need to save more for a shorter period of time. Or if you decide to live simpler in retirement, you will not need to create so large a pile of income and assets.
Call in a pro if DIY doesn’t get it done. This can all get very complicated. There are a lot of moving parts. I have only scratched the surface of all the issues you need to consider. So if this seems to be more of a do-it-yourself project than you feel comfortable taking on, find a professional you are comfortable working with. Ask others who have retired if they have an advisor and if they are comfortable with that person. Don’t’ settle – keep looking until you find someone right for you.
I don’t know who is right – you or your husband. And it sounds to me like neither of you really knows either.
But here’s what I do know – the time for you to find out is now.
Ten years can go by quickly.
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