Retirement Realities
America’s retirement today is completely different than in the past. Gone are the days of employer-funded pensions, life-long employment with retirement and a golden watch presented at age 65. Today’s 65-year old is more than likely still working and still saving for retirement, or a retirement that includes part time work. However, retirement is about more than money.
Retirement Planning is Multi-Faceted
Planning for retirement should start with a comprehensive estate plan to address incapacity, long-term care, end-of-life directions and the eventual distribution of property. Wills, trusts, advance health care directives, financial powers of attorney and other documents need to be prepared, executed and shared with all relevant parties. Your estate planning legal documents should be updated at least every three to five years, and certainly whenever changes during this time of life require adjustments. These changes include births, marriages, divorces, mental and physical disabilities and deaths in the family.
A fulfilling, rewarding retirement does not happen automatically. The years before retirement will ideally include time exploring interests, determining specific goals and creating a road map for the three stages of retirement: an early and active initial stage, a second slower but still active stage and the slow and reflecting stage, sometimes called the “no-go” stage.
Each of these stages has different financial needs. The first part of retirement is usually more expensive, including bucket list items, travel, new experiences, and hobbies. Multi-generation trips create lifelong memories for family members. Work may continue, but on a part-time or consulting basis.
The second phase of retirement usually shifts to spending more time with family members, relocating to live closer to family or moving to a continuing care community. The sale of the family home often occurs at this time, when retirees sift through a lifetime of possessions and determine what they wish to take with them, what they want to give to family members and what they can let go.
The last phase of retirement is likely to have the lowest cost, since big ticket items like travelling and relocating have already occurred. Activities are closer to home. A senior community offering a wide range of social activities, including clubs, volunteer opportunities and classes, can promote a fulfilling and busy schedule, even as the physical restrictions of aging begin to be felt.
Preparing for Large Changes
The elephant in the retirement room is mortality. Neither you nor your spouse will elude death. One spouse may die before the other. Consequently, an unflinching look at finances for the surviving spouse is a major retirement reality. What will happen when the household cash flow drops from two Social Security checks to one? Will there be enough assets to fund the same quality of life for the surviving spouse?
Incapacity and serious illnesses also are more likely to occur in the last phase of retirement. Advance planning for long-term care, whether at home or in a nursing facility, becomes critical before an urgent health crisis triggers the need for permanent long term care. In a perfect world, tools including long-term care insurance, Medicaid Asset Protection Trusts, Pooled Trusts and other estate planning strategies have been put into place in the early stages of retirement to protect the quality of life for both spouses, regardless of their health status.
Planning Makes All the Difference
Every stage of retirement has its own personal, legal and financial considerations. Planning for everything, from recreation to long-term care, will allow for more enjoyment in what should be one’s golden years.
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