SecurePath by Transamerica

The Retirement Boom: getting ready one step at a time

Whether you leave your career behind at 55 or 75, you could realistically be retired for 20 years or more. What will you do with your time? Will your savings last? It's never too early to start retirement planning. Following these four steps is a great start.

Step One: 15 years out, give your retirement serious thought.

This is the time to start getting real about retiring. You've probably imagined what retirement will be like. You need to start comparing those thoughts with the reality of what your financial situation may be when you do leave work full time. What do you truly want out of your retirement? Now is the time to think this through and begin planning financially for it.

We suggest putting your retirement goals down on paper. Do you want to travel? Move to a different climate? Continue working part time? Begin a totally different career? Next, review and write down what you're doing financially to be prepared 15 years from now. Once you've completed these tasks, you might strongly consider meeting with a financial planner to discuss your goals versus your savings. You may already have someone you trust. If not, seek out a certified fee-only planner who will give you an unbiased opinion of how you should proceed.

Fifteen years out, you have enough time to make adjustments to your savings habits to fulfill your retirement dreams. But, you should give it serious thought now in order to make solid, forward-thinking decisions.

Step Two: five to six years out, do a reality check.

You can see light at the end of the tunnel. You feel your finances are on track and you're looking to your retirement with great anticipation. This is the perfect time to make sure you'll have the money you need to enjoy life after your current career.

Again, a financial planner can be of great help here. At this juncture, you'll have a good picture of available resources for retirement income: savings, Social Security, pensions, and so on. Will you need the same amount for retirement as you do now? Will major debts – like a home mortgage – be paid off to ease your financial burden? In addition, you'll want to consider other things that can eat into your retirement income, like inflation and health care.

Five to six years from retirement is also a good time to decide whether you'll want to – or need to – continue working, at least part-time. Your generation is totally redefining retirement, and many are staying in the workplace by choice. In fact, more and more boomers are taking the opportunity to start a brand new career path, even open their own business. Continuing to work longer can enhance your quality of life and may help ease financial concerns by shortening your retirement period and adding to the opportunity for retirement savings.

If you fall into this category, now is the time to look at options for employment – what you want to do, what you can do, even what you'll be willing to do. Maybe you can finally pursue that dream career, put a lifelong passion to good use, or bring the skills you've honed during your first career to a new industry or job function.

The point is, at five or six years out, you can't simply hope for the best. You have to plan for it. The transition to retirement is right around the corner, and you need to be prepared.

Step Three: transitioning to retirement, initiate checks and balances.

Congratulations. You're retiring. You're euphoric, feel completely liberated, and totally ready to enjoy your next phase of life. That's why it's not unusual as a new retiree to spend more right out of the gate for travel, finding a hobby, gift giving, or even a new career or business. The problem? If you're not careful, you could take a huge bite out of your retirement income early, jeopardizing what you have for later.

That's why anticipating and tracking expenses from the very beginning of your retirement is a great idea. From housing and personal expenses to transportation and recreation, keeping a close eye on what you spend at the outset could help offset any future financial problems.

This is also the right time to make sure your estate is in order – including drafting a will, creating an estate plan, obtaining a power of attorney, and authoring a detailed letter of instruction about your estate – if you haven't already done so.

Remember, as a retired person, you'll have a fixed income for the most part, one you'll need to protect and stretch over a longer period of time than any other generation in history. So, doing a series of personal checks and balances in the first few years of retirement can really help keep your future bright and exciting. Contact a qualified attorney for advice in these areas.

Step Four: firmly transitioned, time to settle in.

The next period of retirement can last anywhere from two to 30 years or longer. Here are a few things to consider.

First, make decisions about how to deal with major debt, if you have any. For most retirees, that debt is in the form of a home mortgage. A significant number of married adults 65 and older are still contending with a mortgage, and the number is sure to increase as the baby boomer generation continues to retire.

If you have a sizable nest egg, you could use part of it to pay off your debt, but only if it's sizable. Otherwise, it could jeopardize the financial future of your retirement. The best idea would be to check with your financial planner about an option that works specifically for you and your situation.

Next, get truly settled in to your retirement psychologically and emotionally. Quite often, this time is a period of adjustment as people reorient themselves to the challenges of retirement – staying active and maintaining relationships among them – they didn't necessarily see coming.

Frankly, this period is the most critical time for your psyche. Without activity and planning, this time in retirement could be one of boredom, worry, even depression. How do you avoid all that? Figure out what makes you happy, or at least what kinds of things give you satisfaction. Spend more time with grandkids. Take up a hobby. Learn a new skill. Empower yourself to make this time in your life work to your advantage. It's possible a life planner or life coach – a professional, trained in helping you evaluate your life and mapping out goals and opportunities to improve it – can be of great assistance here.

Enjoying the journey.

As you can see, retirement isn't a sudden thing, but a step-by-step planning process. And with any process, we strongly recommend seeking professional advice and direction. The more you know, the better off you are, particularly when it comes to retirement. Most importantly, the better prepared you are financially and emotionally, the easier it is to enjoy this wonderful journey, one great step at a time!

Copyright © 2006 Forefield Inc. All rights reserved.

Back