Compared to previous generations, you can expect to live a longer, healthier life. As much as 30 years longer.
The Changing Scope of Retirement
Traditional retirement plans are no longer sufficient to support the lifestyle of the modern retiree. The traditional retiree worked for several years in one company, and relied on their Company and NIS Pensions to support their lifestyle during retirement. Retirement planning focused solely on saving enough money for their later years, and people looked forward to retirement as an extended vacation. Retirement has evolved. The modern day retiree has a wealth of opportunities available to them, and continue to be active during their later years. Retirees today enjoy a longer period of good health which enables them to continue being active during their retirement years. Opportunities available to the modern retiree include:
- Continue to work for pay (full or part-time) e.g. consulting
- Volunteering
- Caring for grandchildren or other family members
- Investing in a new business or career
- Travel and leisure
MANY PEOPLE LOOK FORWARD TO SPENDING OVER ¼ OF THEIR LIFE IN RETIREMENT
Financial Planning May Be Disconnected From Reality
People sometimes view retirement broadly, which can make it overwhelming to plan.
HOW PEOPLE VIEW RETIREMENT
Retirement means freedom to do everything I never had the time to do when working!
HOW PEOPLE VIEW RETIREMENT
I don’t need financial planning – My income level isn’t high enough to warrant consulting a Financial Advisor, or I am capable of figuring out a plan on my own.
HOW PEOPLE VIEW RETIREMENT
Denial over the cost of living in retirement – My cost of living will decrease and I will adjust my spending to suit.
THE REALITY
Even simple dreams can be expensive on a fixed income, and retirees are ill-prepared to achieve these dreams.
THE REALITY
Many pre-retirees have no idea how much they need to be comfortable during retirement, or the steps necessary to secure that amount of money. Not having a formal plan may result in insufficient funds or a limited advance knowledge of retirement expenses.
THE REALITY
Retirement costs are uncertain and may decrease (if home/expenses are paid off) or increase (healthcare, taxes, travel). Healthcare is a large unknown and many people are unprepared for the cost of unexpected illnesses which may come about during the retirement years.
A successful retirement plan may be achieved through planning and preparation in many areas of life. The following questions are meant to provoke thought and discussions on your plans for the future.
This discussion takes into account both financial and non-financial matters and their impact on your retirement. Many people are trying to maximize their options for their post-career years. Your retirement plan should include a lot more than how much you will save and how much you need. It must take into account your complete financial picture.
Education and Growth
Do I want to continue learning after retirement?
• Yes | • No
Do I plan to return to school before retirement to study for a second career??
• Yes | • No
Do I plan to take any courses during retirement?
• Yes | • No
Health and Fitness
Am I in good health?
• Yes | • No
Am I currently taking steps to ensure good health in my later years?
• Yes | • No
Do I plan to begin a fitness activity or sport during retirement?
• Yes | • No
Do I have health insurance and plan to continue this insurance during my retirement?
• Yes | • No
Do I have a family history of serious illness?
• Yes | • No
Do I have any prior conditions requiring regular medical care or occasional hospitalization?
• Yes | • No
Do I have plans for health care in a situation where I may require full time assistance and care?
• Yes | • No
Leisure and Recreation
Do I plan to do a weekly leisure/recreation activity during retirement?
• Yes | • No
Do I plan to travel/go on vacation regularly during retirement?
• Yes | • No
Do I have a hobby that I would like to continue during retirement? e.g. golf,
• Yes | • No
Do I plan to attend entertainment events?
• Yes | • No
Career and Work
Will I be happy not working at all?
• Yes | • No
Do I plan to continue working during retirement?
• Yes | • No
Do I enjoy my current career and plan to continue pursuing it during retirement?
• Yes | • No
Do I plan to start or invest in a business during retirement?
• Yes | • No
Do I plan to volunteer?
• Yes | • No
How will I answer the question “So what do you do?” when I am no longer working?
• Yes | • No
Financial
Am I concerned that I will not have enough money during retirement?
• Yes | • No
Do I think I will have enough money to support my desired lifestyle?
• Yes | • No
Do I plan to become more conservative with spending during retirement?
• Yes | • No
Do I currently have short- or long-term debt, and will these debts be paid before retirement?
• Yes | • No
Will I still have significant expenses for my dependents during retirement?
• Yes | • No
Home Ownership
Do I want to move to a smaller home or different area during retirement?
• Yes | • No
Do I plan to do home renovations or upgrades during retirement?
• Yes | • No
Do I plan to use my home equity as a source of retirement income?
• Yes | • No
Relationships
Do I want to move to a smaller home or different area during retirement?
• Yes | • No
Do I plan to do home renovations or upgrades during retirement?
• Yes | • No
Do I plan to use my home equity as a source of retirement income?
• Yes | • No
When planning your retirement, make sure to plan a fulfilling lifestyle for yourself and spend as much time and effort developing your life plans as your financial plan.
Planning Makes a Big Difference
Many people correctly determine that it will be easier to save later in their careers rather than now, so they procrastinate on getting started.
People who establish plans are more likely to engage in behaviors that help them achieve their goals. To ensure you experience the kind of retirement you desire, you need proper financial and lifestyle planning.
- Retirement planning should not be focused solely on money.
- Figure out in advance what you want out of retirement.
- Financial freedom provides more choices throughout life, including during your retirement years
The Retirement Planning Process
The traditional view of retirement has changed, which means that the planning process has also changed.
THE TRADITIONAL RETIREMENT PLANNING PROCESS
Traditionally, people have supplemented their company and government assisted pensions by purchasing insurance and annuities from their agent or savings plans from their bank.
THE NEW RETIREMENT PLANNING PROCESS
Retirement planning beings long before you retire – the sooner, the better.
The new retirement planning process takes a more in-depth look at your lifestyle and retirement goals to determine the best way forward.
Retirement is changing, but that doesn’t mean you can’t still build a healthy, strong retirement plan even with a moderately uncertain future. Your retirement is something that needs to be made to last a long time.
Define what you need
- Determine the outcome you wish to achieve
- Research your options and make informed decisions
Determine what you have
- Figure out where you are now financially
- Develop a comprehensive financial plan taking into account factors such as job loss, health issues, etc
Decide a way forward
- Implement your retirement plan
- Review your plan periodically and adjust as necessary