The coronavirus has changed just about everything for just about everybody everywhere.  Think about what you were doing, thinking, planning six months ago compared to the reality of today.  And nobody, for sure, knows what the next six months will hold.

Retiring is the biggest life change most people make, yet few plan for it properly.  With a deep global recession, retirement may come sooner than expected, making planning—both emotionally and financially—more important than ever.  

More and more people are finding that they will live 20 to 30 years in retirement.    It’s really important to do your homework, know your options, and plan – then plan some more.  People making knee-jerk decisions about their portfolios or financial plans without examining the ramifications of those decisions can potentially make things a whole lot worse.

If you are retiring or thinking of retiring over the next 5 years here are 6 factors to consider and discuss as you plan for retirement.

Understand how much you need.

Need and want are often very different. People often want and dream of travel and a life of leisure.  Your retirement can be fulfilling if you focus on what you need and adjust your wants to the current reality. How much do you really need to be comfortable? What are your housing, auto and normal living expenses? These numbers make up the largest part of determining how much you need to retire. If you don’t have enough, can you adjust your current lifestyle – even for a period of time so that you spend less and have more to sock away for the future.  Even small amounts regularly and prudently invested can grow significantly over time.

Create Flexibility. 

Having appropriate liquidity and ready reserves allows you to take a deep breath and consider your needs now and in the future. Two things can be especially harmful to retirement plans, little or no emergency funds and credit card debt.  If your reserves are low or non-existent spend less and put some of what you would have spent into an emergency fund. For sure you are not traveling as much as you thought you would.  Take that money and sock it away. 

Debt is often the killer of flexibility. Too much house debt, auto debt or credit card debt can often trap you into making payments over what you can afford – especially if income should be lower than usual.  You may need to make some short-term changes — spend less now, delay purchases, or downsize your living.  Use the saving generated to pay off debt.  Once the debt is gone and you can stop those payments you will have excess you can use for future goals.  Remember, this too will pass, it’s not forever.

Maximize Social Security.  For many people social security is an important source of retirement income.  Some have pensions, others significant retirement savings and still others will inherit money.  Most all will have social security. For two income families there are several opportunities to increase the combine lifetime social security received.  Consider the variance between the higher income earner and spouse as well as age difference. There are a number of claiming strategies that may apply to your circumstances to improve your result. The goal is to maximize social security while both spouses are alive plus the amount that will be received by a lone surviving spouse who may live well into their 90s.

Investing for Retirement.

Investing as you prepare for retirement and during retirement is no trivial matter.  Most people will spend more time planning a vacation than carefully considering their investment strategy.  If you are not inclined to do the work yourself than seek a competent investment adviser that can help.

The market has been impossible to predict, as stocks dropped a gut-wrenching 30% between January and March before recovering those losses this summer.  No one could've foreseen what would happen in 2020, and no one knows what the second half of the year will bring. While that presents a number of conundrums for the average investor, for those on the verge of retirement, there's really just one big question: What should you do?

The reality is that if you have a properly diversified portfolio that aligns with your investment time horizon and goals, this is probably a really bad time to make significant changes.  Building a diversified portfolio, rebalancing as needed and sticking to your overall plan often is the key to successful investing.  Don’t panic.  This too will pass.

Know your health care options.

A recent study by Fidelity Investments found that a 65-year-old couple retiring in 2020 will pay an average of $295,000 in health care costs over their lifetimes. That number includes Medicare premiums, deductibles and copayments. It doesn’t include long-term care, dental, vision or hearing costs.

Of course, the amount you’ll need will depend on when and where you retire, how healthy you are, and how long you live. The amount you need will also depend on which accounts you use to pay for health care—e.g., 401(k), HSA, IRA, or taxable accounts.

Most retirees start with basic Medicare and then add either a Medicare supplement policy (Medigap) or Advantage Plan to cover some of the copays, deductibles and the like. There are numerous plans with varying premiums so do your research to find one that fits you budget.   Even though Medicare Part A (which covers hospitalization) is free for most people, Part B (which covers physician services and outpatient care) costs $144.60 per month – or more for high earners. Medicare doesn't cover prescription drugs, but you can buy Part D prescription-drug coverage to help with those expenses.

If you are under 65 consider putting money in a health savings account. The money contributed is tax-deductible, and both the earnings and withdrawals — as long as they’re for health-care expenses — are also not taxed. In other words, you get a triple tax benefit.  You have to first make sure your medical insurance is one that permits funding a health savings account.

Enjoy your blessings.

It’s easy to get caught up focusing on our difficulties, particularly during this pandemic.  But let’s face it God is good and we have it easy compared to most people in other places in the world.  Whatever your retirement ends up looking like take a moment to count your blessings – it could be much worse.  Do you have food, clothing and shelter?  Do you have sunshine?  Can you watch TV, surf the web, or listen to music? 

These blessings don’t stop there, they often include the talents, skills and unique experiences God has provided each of us. So as you prepare for retirement, there’s the financial side, but equally as important have you stopped to think how you might continue to use those blessings, just what you will do in retirement? When you retire, God’s not done with you. Check out our post, The Meaning of Retirement, for how you as Christian might answer this important question of retire to what.

Retirement Planning

Don’t delay your retirement dreams. Learn more about out retirement planning and how Cooke Wealth Management is committed to helping you build a financial plan designed to attain your goals, simplify the complicated, and apply time-honored Christian financial principles. And we are here to guide you every step of the way.

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