Identifying Retirement PrioritiesSubmitted by Miller Financial Group, Inc on April 25th, 2017
Identifying Retirement Priorities
Life happens, and sometimes people get off course through no fault of their own. And yet, often we can anticipate and plan for such contingencies. You can expect the unexpected. You might not be able to prevent every disruption, but you need not let the unexpected ruin your retirement and your life. Often there are tools that may allow us to help you mitigate these risks.
As you approach retirement and your final days on the job, or running your business, you naturally will think more and more about what you may have always wanted to do and accomplish. How will you be remembered after you have left this earth? Sometimes, couples have never really talked about these things. It is certainly a good idea to do so before launching into retirement.
In other words, you must identify your priorities and decide them in writing as a tangible part of your retirement plan. One of the things we encourage our clients, and future clients, to do is to actually write down the things they want to do in the first five years of retirement, ten years, and so on. We feel this actually helps them to visualize what the next few years could look like and how to plan for them.
It has been said that retirees often have their “go‐go years,” their “go‐slow years,” and their “no‐go years.” New retirees typically start focusing on all those things that they have been putting off through the years. They may still feel an abundance of energy and a desire to venture out to see the world.
These are the go‐go years. When I work with couples on their retirement‐income planning, we talk about that and try to prepare for it. We often can anticipate that the curve of their spending during retirement will not be linear. They usually spend more on discretionary expenses in the first decade or so, and then that will taper off as they get well into their seventies and into their eighties. They will then be entering the years when they may be going slower. Instead of that trip to Paris, the will be more content to attend their grandchildren’s ballgames in their hometown. They may be going to the doctor’s office more often than their favorite restaurants.
For some, the next step is the no‐go years. This is usually late in life, at a time when spending may actually increase again—although this time not for discretionary expenses but for such costs as long‐ term care or home care. Often, that is the typical financial curve during retirement: a burst of spending, and then a leveling off until old age. “When I quit traveling, or my volunteer activities,” people tell us, “my spending will go down,” and that may well be true to an extent. However, what we typically have seen is that because of increased medical and healthcare costs, the spending does not necessarily decrease as much as you might think it would in this phase. We help plan for that. Although we understand that retirement spending is cyclical, we want you to have enough resources to support yourself in those later years.
How healthy are you? How long do people typically live in your family? The answers to those questions must also be figured into the equation. Once again, a sensible retirement‐income plan needs to take into consideration your unique circumstances. What is right for someone else might be absolutely wrong for you. By working with a professional, you can design a plan that is suitable for you and your particular situation.
Through my experience, I have found that people who were spenders during their working years may have trouble changing those habits during their retirement years. Likewise, those who for years have been inclined to be savers will continue that trend. Leopards don’t often change their spots entirely.
Therefore, we often project spending on most living expenses for recent retirees to be 80—100 percent of what it was before retirement. Especially in the beginning. In most instances, we don’t see that falling off right away. Sure, some expenses might ease back—the cost of commuting to work, for example—but new ones may arise, such as the cost of driving to see the grandkids, going to car shows, or to take golf lessons. During your working years, you may have tended to spend more on weekends. In retirement, when every day is like a Saturday, you can imagine how the expenses could potentially add up.
Whether you are a saver or a spender by nature, your goal and your dreams need to be aligned with your resources. Whether you can do more than you think you can—or less—either way you need to know about it as soon as possible so that you can make the necessary adjustments. That’s the overarching purpose of retirement‐income planning. Until next time, I wish you Better Financial Living!
Daniel S. Miller is an investment adviser representative of, and securities and advisory services are offered through, USA Financial Securities Corp. (Member FINRA/SIPC). USA Financial Securities is a registered investment adviser located at 6020 E Fulton St., Ada, MI 49301. Miller Financial Group is not affiliated with USA Financial Securities.