Planning ahead can help you live your life on purpose. As Tom Brady considered retirement after a season in which he led the league in passing yards, touchdowns, and completions—and after seven Super Bowl championships—the same retirement concerns that affect other people still applied.
In a nod to his seven rings, here are seven suggestions for anyone contemplating retirement:
- Will you work after retirement? Retirement might mean different work or fewer hours. Part-time work or consulting can provide income, insurance, travel money, engagement, and possible tax advantages.
- What happens if you become seriously ill? Major illness can change plans. Medicare does not cover every health-care expense, including many nursing-home costs. Consider how uncovered costs could affect you and your family.
- Where will you live? Your current home or state may be too expensive, or you may want to be closer to family. Retirement can be a chance to live where and how you want.
- Understand Social Security. The goal is not necessarily to collect the most lifetime dollars, but to optimize monthly income. Claiming early reduces benefits; delaying can increase them substantially.
- Expect an emotional adjustment. Not going to work can feel awkward or lonely. Phones may ring less, work friendships may fade, and importance can feel diminished. Plan hobbies, friendships, and meaningful activities.
- Timing can make or break the plan. A major market decline early in retirement can force faster withdrawals. Stress-test the plan and maintain adequate cash reserves.
- Have a financial plan. Use scenario analysis, test worst cases, and update the plan regularly. You may choose to postpone retirement or adjust the lifestyle.
Think of financial planning as a verb, not a noun. Planning becomes more important, not less, as retirement approaches.
-Paul R. Rossi, CFA