Retirement readiness is a concept many people may not realize involves a wide range of factors to consider. In my experience, here are the most prevailing:
Lifestyle: As we plan for retirement, we should consider when to retire, where to retire, and the level of activities we want to enjoy. Since many people spend 20+ years in retirement, it is helpful to think of retirement in three phases:
- Go-Go years when we maintain an active lifestyle.
- Slow-Go years when we begin slowing down due to physical or health conditions.
- No-Go years when illness or Long-Term Care (LTC) needs require medical or personal assistance.
Sources of Income: We should have a clear accounting of our budget and cash flow, including the sources of income we will have during retirement, such as pensions, Social Security, investment income, passive income, along with fixed and variable expenses. Deciding when to apply for Social Security benefits is an important consideration.
Longevity: As we often hear in the news, people are living longer, even beyond 100 years of age. The question is: Will your money last long enough to support your lifestyle, or could your financial resources run out during retirement?
Public Policy: Tax law changes and changes in government programs such as Social Security and Medicare can significantly impact retirement benefits. Consult with your tax advisor to stay abreast of your tax situation.
Legacy Planning: Consulting with an estate planning attorney is important to ensure your wishes are well documented and executed. You should periodically review your will, testament, trusts, and powers of attorney.
Other Factors: These are the unknown events that life throws at us, such as the premature death of a loved one, the need to help a family member in distress, or an unexpected lawsuit. These surprises are hard to plan for, which is why having adequate insurance comes in handy.
Investments: Are your investments well diversified? What happens if the market experiences an unexpected downturn? Is your portfolio aligned with your personal risk tolerance?
Inflation: Does your budget account for inflation? How are your investments positioned to keep pace with rising costs? Do you have enough emergency reserves? Does your income include a cost-of-living adjustment (COLA)?
Healthcare and LTC: Do you have enough coverage to pay for medical bills, including co-payments and prescription costs? Do you need Gap Medical Insurance? Can you continue your employer’s healthcare benefits until you qualify for Medicare at age 65? With over 70% of people age 65 facing a Long-Term Care need, it is important to consider how those services would be covered. Would you prefer care at home or in a facility? Would you depend on family members to assist with activities of daily living?
As you can observe, retirement readiness requires thorough and continued planning, taking into consideration the many factors that can impact your financial security and quality of life during retirement.
Securities and investment advisory services offered through Osaic Wealth, Inc., Member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.
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