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3 Considerations As You Near Retirement


Living the retirement of your dreams takes a lot of planning. It's not just about savings, but also about thinking long and hard about your expectations for retirement, and the costs associated with those expectations. Start with these three considerations.

Finish LIne

Thinking about retirement brings a high level of uncertainty. How much golf or bingo can you actually play without going out of your mind? Will your health—mental or physical—suffer if you stop pursuing your life’s calling of treating others? Will you stay put when you retire, or join the millions of retirees who live in senior communities, perhaps in a state with a warmer climate and friendlier state tax policies?

These are all important concerns and legitimate questions you should consider as you approach retirement; but no question is bigger than this one: Will your retirement income last and allow you to live in something approximating your current lifestyle? As people are living longer and longer, this is an increasingly important question, and the answer can be difficult to predict, because estimating what your daily, weekly, and annual costs will be takes some legwork and can be unpredictable. Here’s a quick checklist of what you’ll need to consider.

Basic Living Expenses

Expenses like food, housing, taxes, utilities, insurance, and transportation won’t go anywhere when you retire. In some cases, these basic expenses might go down, such as auto maintenance you won’t need as regularly if you aren’t making that hour-a-day commute back and forth to the office. But other expenses might go up. With more free time on your hands, you may play golf or eat out more often. Consider how you envision your retirement lifestyle changing when you estimate your basic expenses, and plan accordingly. Don’t forget to consider changes that may impact your lifestyle, such as the arrival of grandchildren.

Discretionary Expenses

This category is going to be a bit more difficult to estimate, because retirement may introduce a host of expenses you haven’t dealt with before. With more free time on your hands, you may get the sudden urge to take that African safari or that Caribbean cruise. Maybe the tennis membership you’ve always avoided because you were never free to play suddenly becomes more attractive. If you’re finally going to start that lucrative antiquing side business you’ve always dreamed of, that could become costly as well. Talk through with your spouse and kids what your expectations (and theirs) are for your retirement.

Healthcare should be considered in this category as well, particularly as you get later in retirement. Your expenses may shift from travel and hobbies early on, to more healthcare expenses later. Health savings accounts and other savings vehicles can help you prepare for this shift. Talk to a trusted financial advisor as you near retirement, and join a community of other retired persons to learn what challenges they faced and how to overcome them.

Shift Your Focus

Finally, one thing that makes many people uneasy is the idea of a savings or retirement account on which the balance is slowly eroded as you spend. One way to alleviate this concern is to shift your mindset: instead of focusing on how long your savings will carry you, focus on how much income your savings will generate once you’ve retired. Think through your potential sources of retirement income, including Social Security, pension plans, earned income, and another potential source of income we’ll cover more fully in a future article: annuities. In short, annuities are investment products you purchase from an insurance company to help generate income when you retire. Annuities have a bad reputation among many, but that reputation is mostly unearned.

Figuring out how much income you will need in retirement may give you peace of mind, but it could do the opposite also—creating stress as you realize that you may need more than you think. Better to open that closet now and address it as soon as you can. Your future self is depending on you.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice