For many of us, when we were in high school or even in our early 20’s, we dreamed about the “real life” after leaving Mom and Dad’s nest. We imagined the freedom, the independence, and all the glorious that comes with adulthood. And then we stepped into that world, just to realize that with that freedom comes the responsibilities to take care of ourselves, and maybe our own families. That it is not all just parties and exotic vacations, but also get our own meals and wash our own dishes. That the even seemingly good paychecks are taken quickly by all the taxes and bills, leaving little to those parties and vacations. Not to mention possible debts on credit cards and loans…
Just like adulthood is not all fun and free, retirement is also not as it often portrayed as sipping margaritas on tropical beaches. The reality is that, retirement is just another phase of our lives, often lasts several decades. And we live it one day at a time. There are new freedoms to be found, but also new responsibilities, and quite often, health challenges along the way as well.
So, how do you plan for retirement so you can enjoy it more? Here, we are attempting to address just a few of the common questions about retirement planning from financial point of view.
- Start early, start now! I still remember at my very first job, my boss advised me to sign up for the 401K plan, and “max out” on contributions. And I am so glad that I took his advice to heart. With young people, even though your income might start fairly low, your expenses are also a bit more flexible. So it is a great idea to form the habit of spending less than you make, and try to save for emergency (short-term), mid-term (e.g. a new car), and long term (e.g. retirement) when you are young.
- Stay consistent with saving money. Over the years, our lives change. You may change jobs, get married, start a family, buy a house… All involve significant amount of money. And it is easy to say “now is not a good time” to savings, but if you did, and build on it, your future self will definitely thank you for that.
- Think of retirement goals early. For many of us, planning for retirement may feel like a daunting task that is too complex to even start, so we kick it down the road. My recommendation is to start thinking about it early. When do you want to retire? What do you like to do? Where do you want to be? And how do you like to live. These goals and expectations can majorly impact how happy you feel in retirement.
- Try it out. Before you purchase an RV, try some week-long or weekend trips in a rented one. Before you purchase a timeshare, go visit the place once or twice to see if you really want to go to that same place every year. Before you truly retire, try some of the activities you want to do before you decide if that will be a big part of your retirement, or not. Especially if that decision have a significant (one time as well as on-going) cost to it.
- Prioritize your health goals. It is more fun to think of vacations if you are always going to be in perfect health (physical and mental), though you may not enjoy many of your goals as you planned if that’s not always the case. Prioritize your health goals, and financially support your healthcare needs, will pay its dividends along the way.
- Be flexible. Things change –the market changes constantly, interest rate and inflations changes, even tax laws change from time to time. Your situation, your health, your perspective and priorities may change as well. So, be flexible. Embrace changes and adapt to them. That does not diminish the role of planning, though it does require one to be open to change your plans to meet the current needs.
A wise man once said “Failure to plan is planning to fail”. So, plan well, prepare early and be open to changes – that is the formula to have a happier retirement. Overwhelmed? Talk to a qualified professional, such as a CERTIFIED FINANCIAL PLANNER® practitioner, to find out how they might be able to help you to plan for a more enjoyable retirement.
Please feel free to reach out to me if you have any questions: li.tian@lpl.com
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. Li Tian, Ph.D., CFP® and LPL Financial do not provide tax or legal advice or services. Please consult your tax or legal advisor regarding your specific situation. CFP Board owns the marks CFP® and CERTIFIED FINANCIAL PLANNER® in the U.S.