2017

CAREER CORNER

Penny-Wise Planning

Find your financial footing before your golden years

by Jack B. ReVelle

Whether you’re self-employed, working for someone else, a young professional or a seasoned veteran, you must think about what will happen after you step down from your career. When that time comes, you’ll lose your income, daily job responsibilities, insurance and likely your health. Proactive planning is necessary if you want your golden years to be your best years.

Drawing from my experience and that of my senior colleagues, here’s a guide to what you should consider as you contemplate retirement.

Finances

Your weekly or biweekly paycheck is gone, but your expenses likely aren’t. I recommend having one or two dependable sources of income to enjoy a comfortable retirement. A secondary source of income may be in the form of a company retirement plan, a 401(k), individual retirement accounts, annuities, rental properties and investments (including stocks and bonds) to supplement Social Security.1

The expense side of your ledger may include life insurance, health insurance and rental or mortgage payments. Utilities, home maintenance, prescriptions, food, travel and entertainment should be considered. If you don’t have access to two income sources, or if they aren’t enough to cover expenses, you may need a full or part-time job.

Schedule a meeting with a financial planner to assist you with getting your financial act together. If you’re married or have a partner, go together so the full picture is understood by both of you.2

Home

Do you plan on staying in your existing home or moving? Do you have the resources and interest to consider a vacation home or the desire to relocate permanently to a dream destination? Should you downsize? Your living arrangement may be motivated by your children and grandchildren, your preferred climate and tax rates.

Health

It’s imperative that you plan how to handle you and your family’s health needs following retirement. While you have leeway regarding when you begin to receive Social Security payments (age 62 to 70), federal law requires you to enroll in Medicare benefits when you turn 65 or face a financial penalty.

If you want coverage for major health issues beyond what Medicare provides, look into a Medicare supplemental insurance policy. Considering the ever-increasing cost of long-term care, supplemental insurance is a small price to pay to protect yourself and family from the potentially bankrupting expense of a serious illness.

Activities

Don’t forget to factor your daily and special activities and hobbies into your retirement plan. Daily activities and hobbies might include participation in sports, book clubs, gardening or painting. Many daily activities have associated costs, such as equipment or special apparel. Special activities are typically larger expenses and may include going to the theater, attending sporting events and traveling.

Transportation

Just because you’re retired doesn’t mean you won’t have places to go and people to see. Your transportation needs are important considerations. Do you plan on sticking with your existing vehicle or do you need to purchase or lease a replacement? Will you use public transportation as your primary or secondary method of going from A to B?

Details and decisions

This column is a far cry from being an exhaustive laundry list of your personal retirement needs, but it’s a start. You must examine each area of your life in great detail prior to retiring. Online Figure 1 is a complete decision tree and partial checklist that I encourage you to use to plan your retirement, whether you want to start now or in 20 years.

Online Figure 1

The closer to retirement you get, the more detailed your plan should be. There are many looming decisions that will require thoughtful reflection and research. And of course, timing is everything. When should you make these decisions and which ones come first? The answer is usually: the sooner, the better.3


Notes

  1. To find out when to claim Social Security to maximize your benefits, visit www.aarp.org/ssbenefits.
  2. Find ideas and timelines related to saving for retirement in "The Good Life for Less," AARP: The Magazine, October/November 2013, http://pubs.aarp.org/aarptm/20131011_pr?folio=c1#pg1.
  3. For more information about saving for retirement and the investment options available, see "Tips for Planning Your Retirement," Money, http://money.cnn.com/pf/money-essentials/.

Jack B. Revelle is a consulting statistician at ReVelle Solutions LLC in Santa Ana, CA. He earned a doctorate in industrial engineering and management from Oklahoma State University in Stillwater. ReVelle is the author of several books, including Home Builder’s Guide to Continuous Improvement (CRC Press, 2010). ReVelle is an ASQ fellow and a 2012 recipient of the ASQ Shainin Medal.


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