If we are to believe the dismal reports in the news, Americans, as a rule, are woefully unprepared for retirement. Retirement planning is not a sexy topic. Most of us don’t enjoy discussing details of our pensions and 401K’s or lack thereof. It is easier not to think about it.
Maybe because it was early spring and we didn’t have much else to do in the evenings, my husband and I recently took a retirement class. This was not one of those fancy dinners in an expensive steak house given by investment firms looking to solicit business, but an actual class taught through a university extension.
We felt we were pretty savvy about our retirement, but we know there is always more to learn. We also wanted to know if we were making any big mistakes with our retirement plans. We figured it would be worth a few Thursday nights, and if not, we could just skip out and go get dinner.
The class was more engaging than I had expected it to be. We affirmed things we already knew, but also learned some new things. Here are some surprising lessons we learned:
1. According to actuary experts, the first person who will live to 150 years of age has already been born. This probably isn’t any of us reading this, but isn’t it amazing to think about? Our life span has been increasing each year due to medical advances, better nutrition and healthier lifestyles.
2. The average retiree today can expect to spend 1/4 to 1/3 of their life in retirement. Many people today spend twenty, thirty or even forty years in retirement. Retirement is no longer considered a downward cycling of life but a long period in which to create an exciting new chapter for ourselves.
3. Today, the goal of retirement is often to achieve financial independence while continuing to engage in work that we love. Once, the goal of retirement planning was to accumulate enough money to be able to retire, leave work and focus on leisure. Though some people work late into their life through necessity, a growing percent of people choose never to retire. They explore new and different work out of the desire to contribute in meaningful and fulfilling ways.
4. Many retirees go to school for advanced degrees or start new businesses. As Ralph Waldo Emerson said, “People do not grow old. When they cease to grow, they become old.”
5. Successful retirement planning is more than financial planning. It also involves health, fitness, leisure, spirituality, home, relationship and community planning. The bottom line is that you need to plan for more than having enough money.
6. The income tax implications of retirement are wide and varied. Interest rates, inflation, required withdrawal and income from part time work or alternate careers impact taxes in strange and complicated ways. You may want to involve a tax advisor in your planning.
7. December is usually the worse month to retire. A large percentage of people choose to retire at the end of the year, but since people often receive extra or larger paychecks upon retirement, it is often to their best advantage to retire at the beginning of a new year since income will likely be less in that year.
8. Many people have not declared or updated beneficiaries of their retirement pensions, 401k plans, life insurance accounts and other income streams. After your death, money will then go to your estate, where survivors are left with fewer options for rollovers and disbursements. One advisor shared that if he could be sure we did only one thing it would be to make sure to update the beneficiaries on all of our accounts.
We walked away from our class feeling comfortable that our plans for retirement are basically sound. We were overwhelmed by the tax implications, and though I have always prepared our taxes, I realize that retirement might be a good time for tax advice from a professional. We are both checking our beneficiaries on all of our accounts. We also decided to create wills and have powers of attorney drawn up.
What about you? How are you planning for retirement? Are you dreaming of what you will do in retirement?
Here’s to happy planning,
This post was previously published in a different version on the web site Sixty and Me.