By Bleckley Dobbs, CFP®, RICP®
The Baby Boom generation is now retiring en masse, and the topic of Retirement Income Planning has increasingly been in the news. The front edge of the generation, born in 1946, is turning 70 this year. Many boomers have delayed retirement, but will still be facing required minimum distributions and other transitional decisions. Google the term “Retirement Income Planning” and you will get about 10.5 million results. Before delving into the countless lists of suggestions and tips, first try to understand yourself, your motivations and those of your spouse/partner (if applicable) in order to make a successful transition to retirement.
Retirement is very personal and calls for thinking deeply about what’s most important to you. Change is stressful. Although most people look forward to retirement, the process of planning for and transitioning into retirement can be daunting, both financially and non-financially. To better envision your retirement, consider these three key questions: What will you be doing? Who will you be doing it with? What will it cost – and where will you draw that income from?
Determining whether we have enough money to pay for the retirement lifestyle we desire is a big consideration, but there are many other stressors that have little to do with money. For example:
- With your workdays no longer structured, what will you do all day? Playing golf five days a week won’t be five times as enjoyable as playing golf once a week.
- What will it be like spending significantly more time with your spouse? Several clients have related to us the difficult transition involved with going from spending a few hours per day with their spouse, to spending all day every day together.
- How will friendships with former co-workers change?
- After working for decades, and having your identity tied to your work or profession, what will it be like to no longer have that identity? What will you say (and how will you feel) when you meet someone who innocently asks, “What do you do?”
Living off assets in retirement is much different from, and often much more difficult than, saving for retirement while working. Many of our clients are diligent savers, who pride themselves on saving money regularly during their working years. This can become an important part of their identity. Going from saving money every month to routinely taking money out of investments and spending it can be a huge psychological hurdle.
Circumstances – whether personal, economic, market, or something else – change leading up to retirement and in retirement, so ongoing planning is crucial to long-term success. Here are a few examples of situations to consider as you are planning:
- It can take a long time to prepare financially, mentally and emotionally for retirement. Waiting until the last minute to contemplate challenges in this transition can cause anxiety. Begin seriously planning at least five years before you think you will want to retire.
- Many people leave the workforce earlier than expected for a variety of reasons, including health problems, layoffs or job eliminations, or the need to care for others. Although most of these situations are not preventable, they are not necessarily impossible to prepare for.
- The emotional and psychological considerations of retirement are every bit as important as the financial considerations.
- Consider scaling back on work gradually, or finding a part-time transitional job, if possible. A more gradual transition can have great financial and emotional benefits.
- Evaluate how much you are currently spending to have a starting point for how much money you will need to support your desired retirement lifestyle. Don’t rely too much on rules of thumb (e.g., 70% of pre-retirement income) to determine how much money you will need for retirement. Try out the “retirement budget” for a while before you retire to see how it goes.
At Lucien, Stirling & Gray, we have been helping people plan for retirement and successfully negotiate this important transition for many years. We realize there is much more to retirement planning than figuring out whether or when you will run out of money. Our approach to retirement planning involves specialized asset management paired with a dynamic and ongoing conversation, rather than a one-time, static plan that can quickly become obsolete. As a result of the experience we have gained helping others, we can help you too.
The increased focus on Retirement Income Planning prompted The American College of Financial Services, the largest provider of financial education in the country, to introduce the Retirement Income Certified Professional (RICP®) certification in 2012. Bleckley enrolled in this program in 2013 and obtained his RICP® certification in 2014.