Retirement Research Results and Recommendations

 

I recently reviewed notes that I took at recent presentations about retirement. Below are seven recommendations that stood out to me and might be helpful to Money Talk blog readers:

Define Your New Self- People may retire after decades of work, but they do not retire from life. To prepare for this transition, make a point to define yourself by who you are rather than what you do. Start with the words “I am [your name]” and then describe a passion (e.g., travel), a hobby (e.g., stained glass), a pet (e.g., “I have a dog named Sadie”), a favorite sport (e.g., “I love to play pickleball), or some other aspect of your life without incorporating your job title or employer.

 

Be Realistic About Retirement Age- Retirement age is an important assumption in retirement planning and can happen earlier than expected. Studies have found an average gap of about 4 years between expected and actual retirement age and about half of U.S. workers retire earlier than expected. The older the age that people plan to retire at, the less likely they are to reach that goal. One study found that people retire a half year early for each year of work planned after age 61.

 

Know the Planning Levers- There are four key moving parts in the retirement planning process. People can retire earlier or later, save/invest more money or less, spend more money or less, and take more or less risk with investments. It is ironic that many people who have sufficient money to live without an employer paycheck (i.e., financial independence) often choose to work longer.

 

Face Your Fears- Why do some people delay retirement even when they reach financial independence? One reason is that they don’t want to deal with future changes or they fear conflicts with their spouse (e.g., a retirement living location), so they keep on working. Conversely, many people who need to work in later life to pay their bills often can’t due to health issues or layoffs.

 

Understand Potential Life Expectancy- Retirement is “not just 10 years of golf and you die.” Rather, it can last 20 to 30 years (or longer) for many people. This necessitates attention to both personal health habits (to live the highest quality of life for as long as possible), adequate savings (to not outlive your money and rely solely on Social Security), and future long-term care needs.

 

Consider Charitable Gifting- People start to think more about leaving a legacy as they get older. Research indicates that people who gift time and/or money to charities often live longer than others. Also, many donors want to know the results of their giving. If a charity does not provide this information, donors may stop gifting. Donors also select charities that align with their values.

 

Consider the Four Seasons- The four seasons of retirement planning are: Accumulation (e.g., saving/investing in taxable accounts and qualified retirement plans), Distribution (e.g., pensions, annuities, dividends and interest, and required minimum distributions), Preservation (not running out of money during your lifetime), and Transfer (passing on assets when you pass away).

When planning for later life, it is best to be proactive- not reactive. Additional information about retirement related topics and transitions in later life can be found in my book, Flipping a Switch.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.