The Right Time?
Over the past 25 years in my work, I have had the privilege of guiding countless investors through the journey of building wealth with low-cost index funds to achieve financial independence throughout retirement. Now, at 65, as I contemplate my own retirement, I find myself reflecting on the critical questions we have pondered that help determine the right time to retire.
Here are five major questions to ask yourself as you navigate this significant life decision.
1. Have You Achieved Financial Independence?
Financial freedom is the cornerstone of a successful retirement. Assess your current financial situation: Do you have enough savings and investments to sustain your desired lifestyle without relying on employment income? Consider your portfolio's ability to generate sufficient returns to cover expected expenses AND unexpected financial risks.
2. How Will You Manage Healthcare Costs?
For most of us, the big unknown is unexpected healthcare costs. Evaluate your healthcare coverage options, including Medicare and any supplemental insurance. Consider potential out-of-pocket expenses and long-term care needs. Ensuring you have a robust plan for healthcare can provide peace of mind and financial security.
3. What Is Your Withdrawal Strategy?
Creating a withdrawal strategy that minimizes taxes is essential for maintaining your cash flow in retirement. Consider how you will integrate Social Security benefits, required minimum distributions (RMDs) from your IRA, and periodic portfolio withdrawals. A well-thought-out strategy can help you manage your income efficiently and reduce your tax burden, helping to ensure your financial resources last throughout your retirement.
4. Have You Addressed Estate Planning?
Estate planning is a crucial aspect of retirement planning. Ensure your will, trusts, and beneficiary designations are up to date. Consider how you want your assets to be distributed and any legacy you wish to leave. Proper estate planning can help protect your loved ones and ensure your wishes are honored.
5. Are You Emotionally Ready To Retire?
Retirement is a major life transition that can impact your identity and daily routine. Reflect on your emotional readiness: Are you prepared to leave your career behind? Do you have a plan for staying engaged and fulfilled in retirement? Emotional readiness is just as important as financial readiness in making a successful transition.
Plan With Peace of Mind
As you ponder these questions, remember that retirement is a highly personal decision. It's about finding the right balance between financial security, personal fulfillment, and peace of mind. By addressing these key areas, you can make an informed decision that accentuates your retirement and allows you to enjoy the fruits of your labor.
If you would like help developing a plan that addresses the five key questions mentioned above, let's connect on a complimentary strategy call*. Discover how our integrated retirement planning services can help prepare you for the life you want to live.
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Investing strategies, such as asset allocation, diversification or rebalancing, do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. All investments have inherent risks, including loss of principal. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies. Past performance does not guarantee future results.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from your qualified tax and/or legal professionals to help determine the best options for your particular circumstances.
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