Transitioning to Retirement? FIVE QUESTIONS TO ASK
that will make an impact on your financial well-being.
by Jill Ciccarelli Rapps, CFP®
Your retirement date may come with mixed emotions. Finally you can have a flexible schedule! At first thought this sounds great, but you may also have that nagging voice that says….what will I do with all my time? What will give me purpose? How much money will be enough? Besides getting emotionally prepared, what questions should you ask to prepare yourself financially?
What is your current lifestyle costing you? A good exercise is to go back at least six months and document your expenses categorizing them by fixed (have to) and discretionary (want to). Don’t forget to include your one-time expenses that may occur outside of the six months you may be reviewing. How will your retirement increase or decrease your expenses? You may pay off your mortgage and not have monthly payments, you may decide you will travel more or you will visit your children/grandchildren several times a year. All of these things should be captured and an estimated budget should be attached to them.
Now the fun part, spend some quality quiet time and ask yourself what new things do I want to learn, get involved in, volunteer for, or are on my bucket list in retirement? I suggest to use a sheet of paper and divide it in four quadrants; label the bottom quadrants things that “have to” get accomplished in your life and label one quadrant short term goals (less than five years) and one long term goals (five years and more). The upper quadrants represent your “want to” items, things that you wish for but are not necessary, like having a second home in the mountains.
When you are doing this exercise you want to think big, this is your bucket list! If you are married, you and your spouse should complete this exercise on your own, then share your goal sheet with one another. Be generous rather than conservative and put a budget next to the items that have a monetary cost.
Will you be taking care of anyone during your lifetime… aging parents, a good friend, your children, your grandchildren? If so, you will need to assess, based on the circumstance, what this may look like in the future and again how much should be budgeted to
this area. This can be difficult to do because this may not be very apparent to you now.
Are you interested in leaving a legacy or being able to help your children/grandchildren during your life time with big life events like their education, first home, health care? You know the drill, put a budget to it.
And last but not least, go through a health care assessment for yourself. How much will your future health care cost? Consider out-of-pocket expenses, before and after Medicare “kicks” in, and if you are willing to spend money staying healthy in areas your insurance may not cover.
If so, how much will it take? If you have a long term care situation, what should you be prepared for?
Finally, after you have answered the above questions thoroughly, use a simple calculation; take your projected expenses in retirement and divide it by a reasonable withdrawal rate, like 4 percent (this will vary and should be reviewed with your financial advisor), to come up with what lump sum you may need in retirement. With this scenario, if your expenses in retirement are projected to be $150,000, than you may need $3,750,000 to sustain your income well into your aging years. Your financial advisor can help you answer the above questions and can use technology to project several different scenarios. Clarify what your “magical retirement number” is and feel comfortable that you have enough to last your lifetime in good and challenging economic times. Now… it is time to put a plan together!
Jill Ciccarelli Rapps
Jill Ciccarelli Rapps, is a certified financial planner and
a trained life coach and is a Partner of Ciccarelli Advisory
Services Inc., a Family Focused Wealth Management Firm
in Florida and New York.
Ciccarelli Advisory Services, Inc. is located at 9601
Tamiami Trail North, Naples, FL (239.262.6577)
Investment advisory services offered through Ciccarelli
Advisory Services, Inc., a registered investment adviser
independent of FSC Securities Corporation. Securities and
additional investment advisory services offered through
FSC Securities Corporation, member FINRA/SIPC and
a registered investment advisor. The views expressed in
this article may not reflect the views of FSC Securities
Corporation. This information is not intended to be a
substitute for specific individualized tax, legal or investment
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