Making early retirement decisions helps us proactively create the life we want, rather than living choices made by default.
Everyone hopes to live a life that ends with few or no regrets. We think of our retirement years as an opportunity to pursue what we’re most passionate about, living a life of purpose and activity.We expect a rewarding lifestyle with ample leisure time to pursue our bucket list.
But the reality of this relies on the planning and foresight that happens long before we reach retirement age.
We don’t fall into a rich, wonderful life by accident.
It’s all about the early retirement decisions we make to ensure we have options down the road. After all, it’s impossible to pursue much if you don’t have money to leave the house or obtain resources needed to remain independent. Lack of these things whittle our choices down to nothing at all.
These three moves at important birthday milestones can help you make early retirement decisions that position you for a life without regrets.
Map out your financial retirement plan before 50.
Even better? Do this as early as possible in your adulthood, and revisit the plan in detail every decade. Proactively planning your finances to support the retirement lifestyle you want is the only way to make it happen.
Are you saving enough to pay for long-term care needs? What about visits to see children and grandchildren, or beloved family members and friends? Will you be able to afford supplies for your hobby, the costs of a pet and travel abroad, if that’s what you want?
Creating a list of the things you’d like to do during retirement, and comparing those costs to your retirement income can be enlightening. As you think through your financials and create a plan for your retirement, that list helps you create a strategic roadmap to follow that builds the retirement income you’ll need.
It’s also important to create this plan in your younger years to take advantage of compound interest, and have more time to set money aside.
It helps you acquire a certain level of financial literacy that is vital to living the retirement you want, and having a financial strategy in place helps you control your spending, which also has a profound impact on your future lifestyle.
“Every decision to spend money has to be a conscious trade-off weighed against your goal. A little belt-tightening won’t do it,” says Arielle O’Shea, a NerdWallet investing and retirement specialist.
“Assume a whole new attitude about your finances.”
A strategic plan can also help you determine where professional help is needed, such as investment advisors or estate attorneys.
Once we have a financial plan, we also need to revisit the plan frequently to make sure it’s still in alignment with what we want, need and expect. Life has a funny way of changing our plans, doesn’t it?
Understand how social security works before 60.
Social security income is a major source of retirement income for most of us—and for those who haven’t saved enough, it’s all there is. Learning the ins-and-outs long before you need to start claiming funds is key.
Your decision can drastically impact your financial situation during retirement, and there are things you should know before you make the decision when to begin collecting social security.
For example, the age you begin collecting those funds impacts how much money you receive. Claiming it before age 70 will heavily reduce what you will receive, so it may be smart to delay retirement, even holding a part-time job to pay bills while you wait. If you can’t hold off until you turn 70, waiting until you’re 65 will boost your income.
Unless there’s a disability situation or a medical issue leading you to expect a shorter than average life expectancy, claiming social security immediately once you qualify at 62 is rarely in someone’s best interests. It’s commonly done, however, by those who are unaware of the benefits of waiting. They simply act on the notifications they receive in the mail, unaware of what they’re giving up.
If you learn how spouse and survivor benefits work, too, then coordinating your decision in advance can put considerably more money in your pocket down the road. For example, a widow may boost his or her income by claiming benefits from the lowest earning spouses’ social security first, then transitioning to the higher earning spouse’s social security later on.
Researching options and planning ahead ensures you’ll receive the most income possible that you’re entitled to receive.
Even if you aren’t too concerned about social security, thinking about how a boost in that income can help you build or preserve your other retirement assets is important to consider. Keeping the money you’ve saved is a big component of wealth management, heavily impacting compounding interests and total net worth.
Define your purpose before 70.
Retirement can leave us rudderless, if we don’t know how to make it meaningful… especially as our loved ones and friends pass on or move away.
Planning ahead to identify how you’d like to spend your time during retirement, and how to make it as exciting and vital as possible, is important.
What passions can you pursue? How would you like to spend your free time? How can you socialize more and get out of the house? What activities would help you remain active and engaged with society? How will you remain fit enough to avoid decline? These are all aspects of a retirement lifestyle that helps you remain independent longer.
Why do this before age 70? Because decline happens as the result of isolation, poor eating habits and a lack of activity and socialization. Planning for an active retirement while you’re youthful and independent helps you remain that way.
Sun Health at Home is a program specifically designed to help older adults in the West Valley and Scottsdale remain independent longer, safety and comfortably in their own home–and coordinate and pay for personalized care, if needed. To learn more, reserve your spot now at our free, no-obligation discovery seminar or call (623) 227- HOME (4663).
Sun Health at Home is the first continuing care at home program in the southwestern United States, and the only one available in Arizona.
(Originally published April 17, 2018; last updated Jan. 11, 2019.)