Retirement planning is often mistaken as a purely financial activity. Life is about more than money; retirement is no different. What the terms ‘success’ and ‘retirement’ denote to you is inherently subjective. Someone who defines success in financial terms will have different retirement priorities as well.
When planning for a successful retirement, it is important to address four basic aspects regardless of how you prioritize them. Failing to address retirement needs comprehensively will lead to discontents a term that is not often associated with success.
The four main considerations (not necessarily in order of priority) for a successful retirement are:
- Health and fitness
- Social and psychological concerns
Before planning, you must dream about your retirement; picture what you want your retirement to be like. To have a successful retirement, you must fully understand what retirement success means to you. You must first understand what your priorities are. Are you most concerned about social involvement, finances or fitness?
Would you like to live in the same area or consider moving after retiring?
Personally, I prefer the beach. So, today even though I am not retiring for at least 4-5 more years, I am actively seeking beach communities, tracking home prices, taxes, etc.
How do you plan to stay socially and physically active after retirement? Do you want to maintain your current lifestyle, live a frugal life or an extravagant one after retirement? No matter what your age, today isn’t too soon to begin planning.
Financial considerations are not the one-stop shop for retirement success. However, you should give them priority because financial worries and stress create unhappiness. According to Maslow’s hierarchy of needs, a person seeks to satisfy basic needs before addressing higher-order needs.
Financial health is a basic need in the modern economy and is one of the pillars of a successful retirement. Financial planning for retirement entails the following:
- Debt reduction/ elimination – Debt is an obligation that hinders your financial freedom. You should start a DIY credit repair as the basic step. During retirement, debt is a handicap. You must plan to eliminate significantly, reduce debt by or around the time that you retire or sooner. I cannot emphasize the psychological benefits that come with being debt free.
- Set financial goals for retirement- Do you know how much income you want during retirement or how much you will need to finance your desired retirement lifestyle? Success is about getting what you want. Goals help you to set a measurable benchmark for success and help you to monitor that benchmark. It’s really that simple. I set goals for the year and then 30 and 90-day benchmarks to make sure I am on track.
- Needs analysis – It is one thing to plan for success and another thing to hope for it. Financial comfort during retirement is important. Even though you cannot predict your future, you can anticipate it and help to shape it. A proper financial needs analysis would help you determine how much you need to save for retirement and what you need to in the present to have retirement comfort. Currently, I live way below my means for a very simple reason, I plan to retire early and enjoy it!
- Using dedicated retirement plans – Employer’s savings plans, individual pension plans, annuities and dedicated investments should form part of your retirement plan. It is important to have plans set aside for no purpose other than retirement and you should use these to accumulate the amount that you believe you need for retirement comfort. It is necessary to place emphasis on capital growth within your portfolio.
Health and Fitness
Your health is your wealth, especially in retirement. You do not want to have medical bills draining your retirement fund or ailments preventing you from enjoying retirement itself. Prevention is better than cure. You should ensure that you do what you can to remain healthy or mitigate existing medical complaints.
Protecting your health for retirement starts at whatever point in your life you are at- whether you are in your 20s,60s, or 80s. It involves healthy living and safeguarding your finances from depletion from medical and health expenses. After all, you need to protect your assets during retirement.
Your greatest asset is you. I have aggressively started working to retrain my body for longevity versus 10-15 years ago when I was focused primarily on strength and muscle training. The key with this is to mix things up and have fun!
Social and psychological well-being-You must know how you are going to cope with the change of working part-time or not at all. Staying socially connected and mentally alert will improve your enjoyment of retirement. You cannot have a successful retirement if you are unhappy for any reason.
Having realistic expectations of retirement can help you to cope with its reality and anticipate them properly.Successful retirement require you to define it first. Once you consider all aspects of retirement in so doing, you are likely not to have a devastating reality check.
Whether you achieve your idea of a successful retirement is up to you. More importantly, your idea of retirement should be realistic and achievable. But don’t get caught in the trap of thinking “It’s too late.” or “I don’t have enough money.” Either way, when you plan and you take action, things will improve. And on that note I am off to the beach once again!
About the author: Emma D, a finance graduate, certified finance planner and a blogger based NY. She keeps keen interest in personal finance, investment and stock market investing ideas. She is the Editor-in-Chief cum owner of Moneyfed.