Are you in your 50s or 60s and wondering what you need to get figured out before you retire? In this episode of the Retirement Made Easy podcast, I share 6 questions you need to ask—and answer—before considering retirement. If you can answer these 6 questions by the time you retire, you should be in great shape. Retirement should be a blessing–not a curse. So let’s get your ducks in a row.
You will want to hear this episode if you are interested in…
- [2:44] 6 questions to ask before you retire
- [4:05] Check out RetirementMadeEasyPodcast.com
- [5:55] Question #1: Do you plan on working in retirement?
- [8:17] Question #2: When will you claim social security?
- [8:56] Question #3: What will your retirement budget be?
- [12:15] Question #4: What will you do for health insurance?
- [13:51] Question #5: What debt do you plan to pay off?
- [15:03] Question #6: How long will your money last?
Question #1: Do you plan on working in retirement?
Do you plan on working part-time or seasonally in retirement? What about your spouse? Some of my clients semi-retire or go back to work in part-time capacity. It might be as a contract employee without benefits. Other clients find a new part-time job to keep busy or with a business or organization that they’re passionate about.
As a retirement planner, I want to help you plan how much income you’ll expect in the first couple years of your retirement. Do we plan on any income? Or none at all? It may also impact when you claim social security. If you’re under full retirement age and you claim your social security benefit, you’re limited on how much money you can earn. Once you reach it, they withhold funds from your social security check.
Question #2: When will you claim social security?
Knowing what your income might be will help us determine if you should wait to claim social security. Are you going to wait and let your benefit defer and grow? Or start receiving benefits at your retirement age? What is the right time for you to start claiming benefits so you don’t leave money on the table? Does it make sense for your spouse to claim earlier?
Question #3: What will your retirement budget be?
You have to know:
- What are my current expenses?
- Do I have expenses that will go away, increase, or decrease?
- If you’re not eligible for Medicare, will you still be paying for health insurance that will cost more (COBRA)?
- Will you spend more on leisure activities? Golf, dinner, travel, hobbies? I spend the most money on Saturdays and Sundays. Guess what? Every day is a Saturday in retirement. People spend more than they expect.
Determining a budget is crucial so you can decide if you can afford to retire with the resources you have available (Social security, 401k, Roth IRA, etc.). Will they provide enough income for your living expenses?
I’m also a proponent of paying off your debt before retirement because your monthly expenses will be far less without car and mortgage payments.
Check out the FREE retirement budgeting tool we offer at RetirementMadeEasyPodcast.com!
Question #4: What will you do for health insurance?
The cost of health insurance is the #1 reason people push off retirement. It’s expensive—and only seems to be getting more expensive. If you have coverage through an employer and are 65 or older, you can jump on Medicare and are immediately eligible. But what if you retire early? You’ll have to decide if you’ll go with COBRA, something on the healthcare exchange, or private health insurance. You need to figure this out months before you retire so you have an idea of what it will cost you and your family. We’ll also include the cost in your monthly budget.
Question #5: What debt do you plan to pay off?
What debt do you plan to pay off before you retire? Do you have a mortgage or car payment that you don’t want to worry about in retirement? Many people set the goal to be debt-free before they retire because their mortgage is their biggest expense. To have that expense gone means monthly living expenses can be far lower. If you can pay off your debt, seriously consider it.
Question #6: How long will your money last?
Based on the resources you have available and what the retirement of your dreams looks like, how long will your money last? Will it last until you’re 80 or 90? 100? What rate of return do you need from your retirement nest egg (all of your retirement investments) for your retirement plan to be successful? The lower, the better.
If we build a retirement plan for someone, we want to give them a high probability of success. We’d love nothing more than to tell a retiring couple that they only need a return of 2% a year for the rest of their life to reach their retirement dreams and goals.
I never want to report to someone that their portfolio needs a 10% return every year. The probability of success would be about 5–10%. It would make more sense to delay their retirement so they have more resources available. Or they’ll have to change their expectations of retirement.
For more details on each of these 6 questions, listen to the whole episode of Retirement Made Easy!