How Do You Know if You’re Ready for Retirement?

If you’re nearing retirement age, you’re probably starting to wonder what you need to do to make sure you’re financially prepared. Is the amount of money you’ve saved over the years enough to sustain you for 20 or 30 years?

Here are some steps you should take before you retire:

Know Your Current Cost of Living

It’s important to know how much you spend each month so you can know how much money you will need each year. If you don’t have a budget, now is a good time to start one. This will give you a good idea of how much you spend each month. Keep in mind that each month will vary. While you may just need money for bills and food one month, you could need new tires and health prescriptions the next month. It’s smart to include some wiggle room into your budget so you will have a little extra for unplanned expenses.

Also, don’t forget that as you get older, your medical expenses will most likely rise. Keep in mind that costs and rates fluctuate such as tax rates, food prices, clothing, etc. And don’t forget about inflation—your every day expenses will go up! This is one of the most overlooked pieces to retirement planning, so make sure that you plan for inflation.

Estimate How Much Income You Will Be Receiving

Add up everything you will be receiving from social security to retirement savings. This will just be an estimate, but it will give you a good starting point to knowing how much you will receive each month. Then, deduct how much you believe you will spend each month from that number.

If you can, wait until you’re 70 to take out Social Security. You are eligible to file for social security benefits when you turn 62, but if you do, your monthly check will be reduced significantly for the rest of your life. You may have little choice if you are out of work or in poor health and need the money to pay expenses. But if you have the wherewithal to work a few more years or have other sources of income, delaying checks until age 66, or your full benefit age, will increase your monthly amount by 33% or more.

Make Sure You Are Emotionally Prepared

Retiring can be a huge change and although it sounds fun, many people struggle with the emotional aspect of it. It can be difficult to go from working full time to having nothing to do. That’s why it’s best to have something lined up for retirement. You need something to keep your mind busy and your heart happy. At Envoy, we describe retirement as your Future Funded Ministry. This is the time where you get to use the resources you saved to support you as you follow God’s call in this last part of your life. Retirement should not be a time of sadness. Instead, it should be a time of joy as you live out the rest of your years in ministry. This could be volunteering for special needs children, creating meals for those in need, or simply helping your grandchildren with their homework.

Here’s the bottom line—make sure that you can estimate how much you will need in retirement. Then make sure you will be receiving enough each month to cover that. Once you retire, begin to follow God’s calling on this latter part of your life.

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Check out these tools and calculators to help you make sure you’re squared away for retirement.

Why Do Some People Work During Their Retirement Years?

Many people assume that if they work hard and save enough, they will reach the nirvana of retirement.

But what exactly does that look like? Let’s explore this state of presumed perpetual happiness.

So, why do some people work during retirement? The general assumption in our society is that you would not work unless you were trying to earn a living.

From that perspective, the nirvana answer to the end of life (or last 30 years in retirement) is obviously to not have to work. This perception cannot be more wrong.

The reality of happiness in retirement is more complex and the reason why many choose to work is more varied than the simplistic observation above.

We can agree that many people choose to work during retirement, but the reasons vary dramatically. Below are 10 common reasons why people work in retirement:

1.     The need to get out of the house and experience a little separation from family members.

2.     Even greeting at Walmart provides a little spare change for that delightful splurge.

3.     For many of varying ages, the difference between a stress-free financial life and a stress-filled one is additional income of between $400 to $600 per month. That amounts to working 10-15 hours per week at a $12-13 per hour rate.

4.     The transition from full-time employment to retirement is stressful in itself. A few years of part-time consulting or working with your last or prior employer provides a comfortable transition financially and sociologically. It can be hard to separate from work friends cold turkey.

5.     Government statistics show that there is a greater likelihood of someone 65 and above, who has retired from their primary occupation, to want to work longer than those who retire earlier, say in their early 60s.

6.     Money is not the only issue; health is a big one. Again, government reports indicate that someone who is healthy will work longer than someone who isn’t. On the one hand, capability gives greater freedom of choice about whether or not to work.

7.     When a person is more likely to keep working well into their 70s, they are healthy with adequate financial resources. So, the very characteristics that suggest there is no need to work are the very characteristics that encourage working longer.

8.     People want to embrace the gap. The highly anticipated time of not working, followed by a gap of 2-3 years, and then the realization that starting work of some kind is exactly what is needed to give additional meaning to life.

9.     There are three stages of retirement: early, middle and late. Working during the early stages is on the rise, while the middle and late reflect more of what we reasonably expect to happen.

10.  There is a mission to fulfill, a calling heard, a passion to express. It’s not the work, it’s the benefit to others that drives the activity, whether there is pay attached or not.

God does have a plan and what joy it can bring when we listen and follow His direction, especially during the last quarter of our lives.

When our lives have meaning beyond ourselves, when we can encourage, support, and help others, we are energized. That energy is translated into action. The action may be to volunteer, working for free, or to be employed, working for money. In either case, the passion and drive for productive activity puts the purpose to the meaning.

Wondering if you’re financially ready to retire? Click here.

Who Gets Your Money When You Die?

Setting Up a Beneficiary

We often plan for our retirement years, but forget to put a plan in place for when we die. What will happen with your money and how can you make sure your loved ones are taken care of and your money is protected?

The individual or ministry who gets your remaining retirement account money when you die is called a beneficiary. If you do not designate a beneficiary, your account will be distributed according to state law and may not reflect what you want to happen. If you are married, your primary beneficiary will usually be your spouse, with children often being designated as secondary beneficiaries.

Setting Up A Living Trust

One very attractive option to deal with your retirement plan account as well as your other assets is to put a living trust in place. When you die, your estate will be distributed according to the laws of the state where you live. The court charged with overseeing that distribution is called the Probate Court. If you have a will, the will tells the Probate Court how you wish the assets to be distributed. The court appoints a probate attorney to help with this process. Depending on where you live, this process could take a long time and cost a lot of money.

The alternative to probate law is to create a living trust and a Trustee is appointed. Typically, the Trustee is you and your spouse while living, with a successor Trustee named by you in the event of your death or disability. The successor Trustee then has the power to distribute your assets according to your wishes reflected in the living trust. The result is that your estate avoids Probate Court and results in a less costly and time-consuming process.

If you have a living trust, your spouse will be your primary beneficiary, and the trust will be your secondary beneficiary. Consequently, if you and your spouse die at or around the same time, the terms of the trust will determine how your money is distributed. If you are single, you can name your trust as the primary beneficiary and have the money distributed according to the instruction in the trust document.

Rebalancing Your Account

Rebalancing your account—taking it back to original percentages allocated or designated to each fund—reduces the overall risk of the portfolio. It makes sense to rebalance twice a year. Again, rebalancing means that the individual investments are rebalanced to the percentages originally designated.

The net result is that you are following the important investment adage of selling high and buying low. Here is how it works—when your account is rebalanced, the funds that have grown the most are sold, and the funds that have grown the least are purchased. Then your portfolio is rebalanced to its original percentages. It seems counter-intuitive; however, the net result is that you are selling high and buying low. This is always a good idea.

Many retirement recordkeeping systems include a rebalancing feature that can be turned on or off by each plan participant. If your plan has such a feature, rebalancing every 6 months turns out to be the most advantageous time frame. Typically, there is no cost to take advantage of this feature.

To schedule a time to review your investments and goals with a licensed advisor, click here.