According to Pew Research, every day for the next 14 years, 10,000 baby boomers will reach age 65. Think about that for a second, that’s a lot of people. And whether they plan to retire at age 65 or in a few years, preparing for retirement is now front and center in their lives.
Over the years, guiding hundreds of clients through the retirement planning process, I’ve seen my share of the good, the bad and the ugly in terms of being prepared for this major life transition we call retirement.
So whether you’re prepared for retirement or just getting started, keep an eye out for some of these common pitfalls:
Failing to Have a Retirement Income Strategy
It’s a saying we’ve all heard a gazillion times. Fail to plan, plan to fail. Once you’ve stopped working and are no longer saving for retirement, your cash flow goes in reverse, so to speak. Instead of saving, you’re now withdrawing. Of course, on the surface that seems easy.
Yet easy has nothing to do with it. How often to take withdrawals? Which accounts to withdraw from? Which investments to sell? How to make your withdrawals tax efficient? Lump sum or annuity from your pension? These are just a few of the questions that need to be carefully analyzed before launching into retirement.
Developing a holistic retirement income strategy (before you retire of course) that is tax savvy and aligns with your overall financial goals is the road to peace of mind in retirement.
Thinking That Not Much Will Change Once You Retire
It’s difficult to understate the impact retirement has on our lives. After working most of our adult lives, you turn around one day, you wake up and it’s the first Monday morning of the rest of your life. As you habitually begin preparing your to-do list on that first Monday morning, it dawns on you that you’re now retired and no longer need to go anywhere and you sure don’t need a to-do list for work. You’re free.
With your newborn freedom come what many refer to as 'gold-plated' problems. Mainly, how do you not just fill up a day’s worth of time, but a month or year of time? How do you structure your time? How to you keep social? How do you stay connected to your friends if you move away?
The solution for avoiding this pitfall is trial runs. If you’ve banked a lot of vacation time, try taking a month or more time off, stay home if that’s where you plan to live when you’re retired or stay for a month in your soon to be new area and imagine you’re retired. This is a powerful way to grab a sneak preview of your future, starring you.
During this sneak preview month, play around with different options. For example, one week fully plan out each day, from when you wake to when you go to sleep. The next week, totally wing it. No plans from morning to night. Another week spend a few a few days taking road trips. And perhaps another week volunteer at a non-profit and see how that feels. You get the idea. Practice makes the master. The more you prepare, the higher the odds of a successful retirement.
Not Understanding the Value of Social Capital
Not every boomer is going to reach retirement age with enough saved to maintain their current standard of living. For many people, that’s unacceptable. As a result, many move to a less expensive area in the country in order to maintain the lifestyle they desire. And if you’re fortunate enough to live in the Bay Area, finding a less expensive place to live is not that hard.
But here’s what missing in that equation. Yes, you can move to a less expensive area of the country, and perhaps even have a higher standard of living than before, but in retirement, that becomes less important than imagined. What does become vitally important is your social capital.
Your social capital may not appear on your net-worth statement, but valuable it is. More and more research and studies on people that live highly functional and inspiring retirement lives illustrates how crucial friends, neighbors and your community are to your overall well-being.
Forgetting to Lead a Life That Inspires You
One of the scariest aspects of retirement is the unknown. What will life be like when you no longer have work as a source of identity, when you’re no longer feeling as valuable and important as you did when work provided so much of who you were, so much of your self-identity? Now what? What happens when you’re just a ‘regular’ person again, not whoever you were in your career, business or practice?
"The mass of men lead lives of quiet desperation and go to the grave with the song still in them."
And to this I add:
"If not now, when?"
Maybe it’s been so long since you allowed yourself to dream that you forgot how to do it. Please give yourself permission to dream, and dream big. Imagine the possibilities.
A life you lead that inspires you, however that takes shape, is surely to be a life that inspires others. That’s the ultimate in paying it forward.
Now it’s your turn. It’s your turn to lead a life that inspires you greatly. You have the time, yes?