Dreaming of the days when you no longer are required to suit up and show up for a forty-hour workweek is commonplace for those of us still working. We spend decades working and building up until the retirement finish line with hopes of rest, relaxation, and a life filled with the things that make us happy. I hate to break it to you; transitioning to retirement and making it a lasting reality is work too.
Making a transition in how you think about and plan for your upcoming life and how you will make your dream a reality without the familiarity and structure of work requires a massive shift in thinking. It also requires a big-picture game plan you can check in on to keep yourself on track. While we are devoted to helping our clients make the decisions and choices that are right for them, we like to start them off with an exercise of thinking through the things they can and should do by themselves.
Here’s the blueprint for a dream-worthy retirement.
It Starts with a Vision
A Retirement plan is called “plan” for a reason. It is forward-looking, it encompasses multiple variables, and it lays out steps you need to take. The most essential part of your plan starts with you. Your vision for what your retirement will look like guides every element of the plan. Before you think about how much you have saved or when to take Social Security benefits, you should spend some time dreaming and envisioning your future life.
Everyone has a different vision of “perfect.” Think about yours: Where will you live? Will you open a business? Do you have a hobby you’d like to pursue seriously? Will you volunteer? How involved will you be with your kids and grandkids? How important is helping them financially? Will you leave a legacy?
These are just some questions to get you thinking about your “perfect” retirement, but the key here is that the vision should be unlimited at this point. You want to motivate and incentivize yourself with a clear conception of your new life. There will be difficult choices to make, and you need to have something to look forward to and something to be a basis for your decision-making. Daydreaming, spit balling, building castles in the air, whatever you want to call it, take a pointer from Nike and just do it.
Once you have a vision, put it down on paper. This can be electronic “paper” if you’re so inclined, or you can buy giant sheets of paper, tack them on a wall and write everything down in big letters. Whatever works for you and your family. You can even make it an interactive, multi-generational experience to think through things as a family – grandkids included.
Your Goals are the First Priority
Once you have a vision, tie it to specific goals. The financial plan that can help you reach these goals can come later, but you need to be clear and intentional. Think about big picture things, not the smaller “how to get things done” details. For example:
- Retire within five years
- Pay off your mortgage
- Purchase a family vacation home on a lake
- Plan a six-month tour of Europe
- Set up a donor-advised fund and identify a family giving strategy
Note that these big picture goals have significant financial impacts, they require in-depth planning and maybe some sacrifices, and they are not short-term. Once you’re clear on your goals, you can get into the financial and lifestyle planning choices and behaviors to help you achieve them.
Spending is More Important in Retirement
You’ve created a vision, and you’ve set clear goals. These steps have probably got you feeling energized, incentivized, and fired up to get this retirement show on the road. That’s good because this next step is where the rubber meets the road. Spending in retirement is the most critical part of your plan. A sturdy investment and tax strategy will keep your plan growing and moving forward but outspending will bring it to a screeching halt.
Because retirement is a significant change that impacts the remainder of your life, it’s important to have a spending plan and the ability to stick to it. That way, when you’ve got more time than money, you won’t be tempted to spend more than your income.
Prioritize big-ticket non-discretionary items come first, such as housing costs and maintenance, healthcare, car expenses, property taxes, etc. Next are the discretionary things like food costs (will you eat out more?), cost of hobbies, personal wellness, etc. Depending on your vision and your goals, these things may all cost very different amounts than they did when you were working. You’ll need to plan them out accurately before you can set up an income plan.
You’ll Change. Make Sure Your Goals – and Your Plans – Keep Up with You
A good retirement plan is one thing above all others: flexible. You personally will change as you both approach and progress in retirement. Life also has a way of changing your plans, in both good and bad ways. You’ll need to adjust to these changes, but to do that, you’ll need to be on top of them. A good strategy is to pick an annual date. It can be the end of the year, the first of the new year, tax season, whatever works for you. Go through the first three steps all over again. Reconnect with your vision, reset and fine-tune your goals, and recalibrate your spending. It sounds like a chore, but it can keep you connected to your plan and help keep your dreams alive.
You want to be honest about whether you are on track with your goals or if they no longer apply, and you need to set new ones. This annual stock-taking is valuable in early retirement because it keeps you focused and keeps your spending on track. In later retirement, your goals may shift to planning for aging and end-of-life. If you’ve made a habit of doing this every year, these tough conversations and plans are much easier on everyone.
The Bottom Line
A great retirement starts with your dreams, creating them, accomplishing them, and sharing them. While you’ll need sound financial planning advice, strategies, and tactics to achieve them and make your retirement everything you want, taking the first steps yourself and making a habit of staying on top of changes can ensure your plan stays on track. Once you tackle your part, we are happy to help you fine-tune the details. Helping you achieve your goals is our passion; if you need help, give us a call. Our office number is 374-9098.
This material is provided as a courtesy and for educational purposes only. Investing involves risk including loss of principal. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. This article contains links to articles or other information that may be contained on a third-party website. River City Wealth Management is not responsible for and does not control, adopt, or endorse any content contained on any third-party website. The information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. Past performance is not indicative of future results.