3 Powerful Questions That Will Shape Your Retirement in the Next Two Decades

Retirement is one of the stages in life that draws anticipation and antipathy from different people. There are many who view it as a well earned respite from a lifetime of sticking to the grind of work. For others, they view it as being put out to pasture, a sign of obsolescence, and loss of usefulness. 

Decisions about retirement can only be made once certain crucial personal questions have been asked and answered. These questions help to clarify specific details, expectations, and aspirations about “retirement”, which shape the subsequent steps one should take to achieve those goals.  

When do I want to retire, and what does “retirement” look like for me?

Timing and vision.  Two of the most important decisions to make about retirement is when to take it, and what are expectations one has from it. Timing is something that one can control to an extent. For example: 

• Early Retirement: those who subscribe to the F.I.R.E. (Financial Independence Retire Early) philosophy look to aggressively save and invest to build up large nest eggs as quickly as possible. By doing so, they can often retire to sufficiently young aged retirements, allowing them to fully enjoy a luxurious lifestyle while still close to their primes, continuing into their golden years. 
• Some with intense, but short lived careers, like professional athletes, often retire from their first careers but still have plenty of youth left to explore a second career. If they have started their retirement fund nest eggs, they still have plenty of time to build them further.
• Others who retire early due to health reasons, may not be so lucky. Their impairments may make building substantive retirement nest eggs progressively more difficult as their health issues deteriorate further. Proactive plans to account for retirement as well as long term healthcare will become the most urgent priorities in those cases. 

• Late Retirement:  For some people, especially those who love what they do for a living, retirement may be an ugly word and not a part of their vocabulary. NBA Hall of Fame guard and New York Knicks sportscaster Walt Frazier is still going strong as he approaches age 80 this year. Clearly loving basketball and enjoying the game many years after his championship days, he facetiously jokes that he’ll retire “after the Knicks win another championship.” – something they haven’t done since Frazier himself led them to a championship in 1972. 
• Others who put off retirement until their later years often may do so out of concerns over insufficient retirement savings or because they still have family obligations, such as children from a subsequent marriage who are still in school.

• Vision: a realistic concept of how one wishes to spend their retirement is also a crucial element for its success. One’s notion of retirement might be a community in a warm climate with beaches, fishing, golf, and other relaxation-oriented pastimes. Others see retirement as a chance to travel and experience many of the things that were not feasible or out of reach during their full employment years. Those with a taste for adventure might even consider taking the expat retirement route, relocating to an exotic country with the amenities they seek albeit at a much lower cost of living to maximize the spending power of the retirement funds.  

How does my spouse/partner’s financial situation or retirement plan align with mine?

Couples who plan to spend their golden years together have a menu of additional concerns that require examination and planning in order to have a chance of realizing their retirement goals. 

• Dual Income Couples: Couples where both spouses or partners have their own jobs and careers have the most options and decision variations. Depending on the size of their respective IRA, 401-K, and other assets, they have some flexibility as to how to plan for drawdown needs, RMD, taxes, and a litany of other timing-oriented elements to minimize taxes and to maximize liquidity and spending power. In the case of couples where long-term health insurance may be part of their retirement package, that may also be a factor for couples, especially if the coverage extends to a surviving spouse. 

• Single Income Couples: When one partner is the breadwinner, the retirement planning needs to account for both parties’ lifestyle budget, and needs to also include funds to cover a surviving spouse. A term-life insurance policy with a sizable death benefit for a surviving beneficiary spouse might need to be a consideration if the retirement nest egg is calculated as too small to be serviceable in the event of an earlier demise than actuarial predictions. 

Whether dual or single income households, retirement plans may also need to accommodate any children in the family who are still not of adult age. Those anticipated costs must also be factored into the equation when deciding on retirement budgets.  

What does my desired lifestyle in retirement cost, and how do I prioritize my goals?

As an extension of the Vision category listed above, deciding upon one’s retirement lifestyle is a key factor. There are a number of determinant factors in how to set and prioritize one’s goals:

Financial:

• The size of the retirement nest egg and how it is managed are the most critical elements. 
• If the funds are subject to income tax, or capital gains taxes, these must be factored into the lifestyle budget and managed accordingly for both replenishment from growth assets as well.
• The lifestyle budget has to be realistic. Ideally it can accommodate for a number of “bucket list” experiences with the nest egg’s capabilities. 

Lifestyle Choices: 

• A retirement lifestyle needs to be grounded in reality. If a life of leisure is desired, then the budget must be able to accommodate it. Otherwise some compromises will need to be established.
• Those looking to relocate need to also factor in tax status, living accommodations, and a host of other potential lifestyle changes required to fit in the new locale. 
• Lifestyles may be dependent on age and health status, and those factors can change over the years, due to illness or injury. With some exceptions, a majority of retirees who are into their 80s will not wish to maintain a heavy physical activity oriented lifestyle that they might have selected in their 60s.

Prioritizing Goals:

• One’s prioritization of goals will be contingent on both financial and physical capabilities. 
• Balancing certain “bucket list” items that may involve travel, physical fitness, and/or a spouse’s complicity with one’s budget so that its immediate cost doesn’t adversely impact a retirement drawdown schedule is crucial for the long term.
• Those experiences that may contain greater risks should only be undertaken once the proper considerations for health and spousal security are in effect.
• If an expat lifestyle is selected, there should be contingencies to return home in the case of the chosen country’s instability due to potential fallout from natural disasters, political instability, or a breakdown in law and order. 

Early made future retirement decisions can always be tweaked later on in the event that circumstances and preferences change. However, the practice of asking the questions, analyzing the details that would allow for one’s preferences, and then saving and preparing to meet that goal is the key to a successful retirement. 

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