On average, 10,000 baby boomers reach retirement age each day in the United States. As business owners and individuals plan for their retirement, whether imminent or a few years down the road, there are many considerations they’ll have to face.
While keeping in mind that each retirement scenario is different, depending on one’s goals, expectations, and the sometimes unexpected challenges there are common factors, in 2023, we are seeing volatility in the world with news on inflation, banking failures, and jittery markets creating stress and uncertainty for everyone, but particularly for those approaching retirement.
The best thing that pre-retirees can do is shift their financial plan from the perspective of “building” wealth to “protecting” what they have built and making sure that they have what they need to live the retirement lifestyle they want.
It is a challenge and takes a real shift in thinking to mentally prepare for the transition of working every day to retirement, but having a solid retirement plan in place is what can help people sleep well at night.
It is also prudent for people to be prepared in case they need to leave the workforce earlier than expected. Often healthcare concerns can be a factor in determining retirement age as well as a business layoff or an offer of an early retirement package. For small-business owners, the perfect buyer for their business may determine their retirement timing.
Historically, the markets have cycles where they go up and down. This should not be a cause for alarm. With inflation rising it is also important to keep in mind that all inflation is not created equal. The Consumer Price Index is designed to capture the activity of all U.S. consumers and that is not necessarily the best assessment for retirees. In retirement, most people are no longer supporting children, buying food for large families on a weekly basis or buying appliances.
Some costs can adjust down in retirement such as commuting costs, automobile usage, and keeping up with business attire.
It’s important to plan and not underestimate healthcare costs. Fidelity recently released estimates that a typical American couple will need $315,000 (after tax) for healthcare costs during their retirement.
One of the biggest decisions that comes with retirement is when to take Social Security and there is no one right answer for everyone. It is important to put a lot of meaningful planning into the decision to begin taking Social Security benefits because, once the decision is made, it is permanent. It may make sense to tap into other financial sources and delay Social Security. A review of any pensions, real estate properties and other assets is recommended. Social Security offers the option of taking a lesser monthly amount at age 62 or waiting for a larger monthly income at around ages 66-67, when individuals are eligible for their full benefits. The amount does continue to grow for those waiting for the final age to receive benefits which is at age 70.
Another thing to consider in preparing for retirement is to take advantage of this year’s higher IRA contributions limits. Under the age of 50, individuals may contribute $6,500. For individuals over 50, they may contribute an additional $1,000 or a total of $7,500.
All in all, the transition to planning for retirement can be emotionally and mentally challenging after a lifetime where many perceive that their worth is tied to their work. A sound retirement financial plan, with the guidance of professionals, can take away many of the challenges leaving people to look forward to enjoying their retirement years.
Johnson Brunetti is a retirement planning firm. Johnson Brunetti provides the financial guidance and service that retirees and those planning for retirement need as they strive to achieve financial independence. To learn more visit at www.JohnsonBrunetti.com.
