We spend much time in transition-whether from the office to home, seeking tenure, or one stage of life to the next-yet we do not spend nearly as much time preparing for these changes and the uncertainty they induce. Retirement is one such transition that comes easier with forethought and valuable insight from those who have been through it. Based on our clients’ experience, we have found much of the uncertainty of retirement falls into one of three categories: financial, family, and emotional. With these tips, we believe you will be better prepared to success fully adjust to the post-career phase.
The transition into retirement carries well-documented financial concerns. The main pitfalls for university professionals include replacement of income, savings, obtaining credit, and healthcare costs. Income and income taxes change drastically in retirement. Typically, retirement income is generated by Social Security and personal retirement accounts, both of which should be part of a tax projection conducted prior to your last day on the job to minimize surprises.
In retrospect, many clients wish they had saved more earlier in their careers, either in Roth investments or other after-tax brokerage accounts. The magic of compound interest can potentially mean the difference between a lean life after retirement or a comfortable one. Clients with savings in multiple vessels find it easier to access needed funds quicker.
Having quick access to funds is important, although sometimes is not enough. When an unexpected expense occurs, retired clients may have more trouble qualifying for a loan than they would have while they were working. Implementing a line of credit prior to your final retirement date can potentially alleviate the need to sell investments at inopportune times or incur penalties on early withdrawals.
Your retirement date and the date you start claiming Social Security do not have to align but having a strategy in place when the time comes can give you an advantage. Deferring Social Security past the Full Retirement Age can increase your benefit by 8% per year, but claiming Social Security as soon as possible reduces the amount you need to pull from your investments to cover costs. Medicare can be equally confusing. You will want the start date of your Plan B coverage to coincide with the final day of coverage under your employer plan, and some retirees may even require a Medicare supplement plan. Consider consulting a CERTIFIED FINANCIAL PLANNER™ to help shed light on these complexities and find potential solutions that work for you.
Home and Family
You may have heard the adage “Happy wife, happy life,” and to a great extent, it’s true. First and foremost, when retirement planning, you need to be on the same page as your partner or spouse. A shared vision, while openly discussing worries or concerns, is the compass pointing to true north.
Family concerns include adjusting to shifting relationship dynamics with your spouse, parents, children, and grandchildren. This new season in your life may constitute a more hands-on caregiver or provider role. It is wise to anticipate family needs before they become crises.
In terms of home life, retirees say they wish they had put more thought into their housing requirements in preparation for getting older. A four-bedroom house may no longer be necessary, just as regular lawn care and seasonal maintenance sound less enticing as the years pass. While many retirees consider moving to be near family, area health services and reliable transportation must also be top of mind.
The emotional jolt of changing a solid routine, decades in the making, can be overwhelming. To ease the transition, many universities offer phased retirement plans, allowing professors to maintain their most loved aspects of their careers, (student work or research, perhaps) and discard the other aspects.
Nudging retirement into a multi-year process creates a smooth and natural transition into your post-career life.
Many clients say they wish they had planned better for their newfound time by finding social groups, clubs, or activities prior to their last day of work. As a side effect of feeling like you have ample time, you may initially overbook yourself. It is imperative to be intentional with your time and your decision to retire. As you acclimate to a new standard, remember it is okay to say no to frequent babysitting and to turn down community volunteer opportunities.
Retirement is generally a lengthy period in which you will be able to delve into each chosen project or experience with thoughtfulness.
You may wish to use this time as a second “getting to know you” stage with your partner. Reconnecting with each other and with yourself will help solidify your current identity and purpose.
The knowledge and experience of others can help us all through difficult times and decisions in our lives. Retirement is no different. Rely on the wisdom of others. Ask questions, including what worked for them and what did not work. Savant stands ready to offer our expertise to those considering retirement. Our goal is to help you understand what you need to know now so that you do not look back and wish you had done things differently.