I know I need to plan for retirement. I just don’t know where to begin!

A peaceful retirement does not normally occur without planning and then effort given to work the plan. Moving through life with no plan for what is ahead does not end well; unless, we are sufficiently fortunate to inherit wealth. However, most would choose giving the cat a bath over committing thoughtful focus to what will be needed in “the golden years.” Rather than allowing the 1000 questions in our mind paralyze us, let’s make this a workable project. When we need our house to be warm, we know what needs to be done. We either turn up the thermostat or retrieve additional hickory for the fireplace. Retirement planning is just that simple.

How do we envision our post-work years?

This is a recurring question with which we deal in the blog, and it will continue to occur. Planning for retirement without giving voice to our dreams is like using a backhoe to plant petunias. Communication is VITAL in this step. Do you want to downsize your home? Will additional funds be needed because you plan to move to an area of higher cost of living? What are your travel destinations and how often will you travel? Will the number and cost of your Christmas gifts increase or decrease? Just as your first move in providing a higher temperature is to stand, your first step for retirement is to paint the picture.

Do not forget the cost of healthcare!

As we approach the magic age of 65, most of us have our primary healthcare funding shift from a private insurance company to Medicare. Oh the bliss! No more worrying about changing insurance companies to find a lower rate. No more aggravations of coming onto a plan with a different deductible schedule. No longer will we be forced to change hospitals or physician groups, because our particular plan dropped the one we use.

Before we plan on sailing into the golden years with no financial issues over health care, we should think about those costs as well! What? You mean Medicare is not the perfect plan? You mean we will have increasing out-of-pocket expenses due to rising costs and surprises? In December of 2016, Marlene Satter wrote about “5 Surprising Expenses Medicare Won’t Cover.” We need to financially plan for them, because they are ALL common to seniors.1

How much money will be needed to make your picture reality?

There are several generic models to which people refer when doing the “rough work” of retirement planning. One article states a “rule of thumb” is 70% of your pre-retirement income.2 In another article the “rule of thumb” becomes 80%.3 “Rules of thumb” are informative, but they are not the place to begin. It is far more accurate to plan the cost housing and travel you desire in retirement and the medical costs to be faced.

Once we have have a good idea of the costs incurred in retirement, we can begin to ask how much money will we need? How much will Social Security cover? Do we have any pension plan income upon which we can rely each month? What adjustments can be made to reduce retirement costs? Is there meaningful part-time employment available that will make some of our dreams possible?

Yes, planning for our senior years can be a bit scary. Retirement seems so far away and so confusing when we are dealing with student loans, home loans, and childcare expenses. It becomes no clearer when our financial concerns are a car for the kids, prom expenses, and tuition at your child’s chosen university. However, it really is not frightening once we understand the steps we need to take in planning. One word to the wise, the younger we begin, the easier the journey!

1 ThinkAdvisor. December 29, 2016. 5 Surprising Expenses Medicare Won’t Cover.
2 http://money.cnn.com/retirement/guide/basics_basics.moneymag/index5.htm
3 http://www.usatoday.com/story/money/columnist/powell/2014/04/13/retirement-planning-income/7592373/