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Retirement Looks Different for Everyone!

A detailed guide to help you achieve your unique vision for retirement, plus some surprising factors you may be overlooking.



By now most of us have thought about how we’d like our retirement years to look and feel. Are you hoping to be a relax-on-the-beach retiree who never wants to work again, or would you rather take a hybrid approach and shift to a more relaxed work-life balance that allows you to pursue what you love part time while still enjoying the freedom retirement can offer? Maybe you want to spend money on lavish vacations with your partner or family. Or maybe you’d prefer to leave a larger financial legacy to them, instead.


Retirement is often talked about as though it means the same thing for everyone, but the reality is that it’s a deeply personal set of goals and hopes. Shouldn’t your retirement planning feel just as personal? We think so.


We’ll walk through some key factors everyone should think about regardless of their retirement vision, plus some guidance to help you plan for your own, unique retirement journey.


Inflation

First, it’s crucial to remember that inflation will still happen after you retire! This may seem obvious, but it’s something a lot of folks will forget to factor into their calculations when coming up with their “retirement number” — the total amount they feel they’ll need saved in order to retire and feel financially confident doing so.


So how do you account for inflation while planning for retirement?


Calculating Your Retirement Number Including Inflation

Though it’s a constantly changing rate by nature, it is possible to use an average rate of inflation for planning purposes. Professionals often recommend using 3% as a healthy long-term average rate, but at EViE Financial we tend to recommend building even more of a buffer if possible. While it’s true that the 3% figure balances recent inflation rates and those estimated by the Federal Reserve Board, we often find that overestimating — planning for, say, a 4–5% average inflation rate — offers more peace of mind.


Calculating in that extra buffer for inflation can go a long way toward preventing sticker shock or running out of funds during your retirement years.


Investing To Keep Pace With Inflation

Another common recommendation we see going around is to invest your retirement savings in a portfolio that keeps pace with inflation.


While this sounds good at face value, there are some factors to consider, the most important being that no investment returns are ever guaranteed. It’s hard not to be tempted by certain types of investments for which returns can keep pace with or outpace inflation, but we suggest reviewing your total retirement investment to ensure it is diversified and at an appropriate risk level for you.


To have a better chance of reaching your retirement goals, we utilize a more bucketed approach, where your retirement funds are divided between accounts or investments with a variety of strategies, risk levels, and time horizons. Doing this can help you weather more unpredictability in the market while still exposing yourself to more potential long-term gains (and, of course, risk) where appropriate and if you so choose.


Keep in mind, too, that you probably won’t be cashing out all of your retirement funds at once. With potentially decades to plan for after you retire, you’ll likely only need some of your retirement money up front and for the first few years, which means leaving some of it strategically invested for longer may be a sound choice.


Need help planning for inflation in retirement? We’d love to connect and learn more about your retirement goals!


Where Is Your Income Coming From in Retirement?

While this is certainly not a one-size-fits-all answer, many if not most people will have more than one income stream in retirement. These may include Social Security, retirement savings/investments, pensions, annuities, part-time work, or business income.


So what will your income really be in retirement, how might it change over the years, and how will that affect your overall budget? Everyone’s answer will be different, of course, but here are a few considerations we think everyone should bear in mind.


To Work or Not To Work in Retirement?

Do you want to work in retirement? For how long? Paid, or volunteer work? Part time or full time?


The question of whether or not to work in retirement can feel quite personal, and will ultimately affect your retirement planning in a very big way. To help better calculate your “big number” while planning to reach your retirement goals, you should consider:

  • Whether or not you want to continue working in retirement, not just whether you’ll need to. If you currently feel like you’ll want to continue working at least part time in retirement like some people choose to do, you should also consider the fact that that desire can change as you age and experience some of the freedoms that a well-planned retirement can afford you. You may find that you truly love to work in your retirement, whether you have the same job you know and love or switch to something you’ve always dreamed of doing. However, you may also find that you would rather transition out of the workforce sooner than you thought.

  • If you’ll need to work in retirement, how long can you reasonably expect to do so, how many hours will you work per week, and how much income can you expect that to generate? This seems like an obvious factor that most people take into account when planning to work in retirement, but a less-obvious variable is how long you’ll feel able to work, and whether you’ll want to or be able to taper off your hours as you need or want to do so.

  • What if something prevents you from working in retirement, or forces you to retire early? While we certainly hope nothing takes this choice away from you, we always recommend planning for the worst-case scenario, simply to afford yourself that wiggle room we mentioned earlier. Then you can continue working if possible and if you’d like to do so, but you won’t be left in as much of a lurch if something happens.

Social Security

Social Security is like Uncle Sam's way of looking out for us when we're not working — at least in part. During our working years, a portion of income goes toward Social Security taxes, helping to fund this long-term benefit when we reach retirement age. Social Security provides income in retirement, over your lifetime (barring no changes to benefits in the future through funding changes or federal regulation shifts), so long as you meet certain criteria.


First, you have to work a certain number of quarters (40) to qualify for Social Security. This equates to about ten years of working and contributing to Social Security taxes through your paycheck/business. Then, there is some math involved to determine how much you will receive in retirement. The Social Security Administration takes into account your earnings history – how much you've made over the years – based on your highest 35 years of earning. Then, a formula is applied to calculate your monthly benefit. But there’s more you need to know.


There are also age stipulations that you need to be aware of. The age when you can start cashing in on these benefits without a penalty depends on when you were born, but it falls between your age 65 and 67. This is known as your full retirement age. However, you can start to take benefits as early as age 62, and as late as age 70. If you start early, you’ll receive a reduced amount, and you may face penalties if you earn over a certain amount of income each year between the ages of 62 and your full retirement age. After you reach your full retirement age, you can earn as much as you’d like without being hit with a penalty or reduction in your benefits.


Waiting to claim social security benefits until later in your retirement years may result in a higher amount received, albeit for a shorter period of time. While some planners suggest everyone wait as long as they can (to age 70) to claim Social Security because it will be a higher benefit, that just doesn’t jive with everyone’s vision of retirement. We suggest reviewing your estimated benefit amount, consider your retirement picture and income needs, then make a decision on when to draw on your benefits.


Fortunately, none of us have to calculate these benefits on our own. You can check out the details of your specific Social Security benefits and how much to plan for in your retirement by visiting the official Social Security website, www.ssa.gov. Your Social Security statement is a valuable tool in helping plan for your retirement, but it can be confusing with all the rules surrounding these benefits. We’re here to help if you have questions.


Costs To Plan for in Retirement

And now for the big question: how much will it cost to be retired? Figuring out how much you’ll realistically need to not just get by but to truly enjoy your ideal retirement is a little intimidating, but here are some of the top expenses to consider:


Living & Discretionary Expenses in Retirement

Basic living expenses like those below are the ones most likely to be affected by inflation and, unfortunately, they’re the hardest costs to reduce! This makes them exceedingly important to carefully plan for.

  • Housing or mortgage costs

  • Costs of utilities, groceries, dining out, etc.

  • Vehicle costs such as loans, maintenance, insurance and registration fees

  • Health care costs (remember that these also tend to increase with age!)

Additionally, you’ll want to be sure to account for the discretionary money that you know you’ll want to have available for things like travel, charitable giving, experiences, etc.


Because these costs will likely vary over time, it’s necessary to have a flexible plan to account for fluctuating expenses, and to review your cash flow every now and again to ensure you aren’t overlooking required or desired expenses. No matter your situation, enlisting a professional’s help when making these kinds of calculations and decisions can provide considerable relief. Need assistance? We’d love to help!


Surprise Retirement Expenses or Events

“Life is what happens to you while you’re busy making other plans.” John Lennon

We’d all love to think we’ll have everything well-planned and figured out by the time we reach the “finish line” and finally retire, but surprises do happen, and you should be prepared for them.


These are some of the top surprise expenses or changes folks may see in retirement:


Medical and Health Care Expenses

Whether they’re short-term but costly medical situations or something as expensive as the need for long-term care, this is one of the most important expenses to plan for.


Care and Support of Family Members

You may find that you’d like to (or need to) provide assistance to children, aging parents, or other family members. Different levels of care will cut into your retirement savings by varying degrees, so it’s best to try to plan for this possibility if it may be a factor for you.


The Loss of a Partner or Spouse

This incredibly sad event is not something anyone wants to think about. Still it’s absolutely critical to plan for, because losing a spouse or partner can have a huge impact on your retirement. You’ll want to think about changes to your retirement income that can stem from such a loss, and have open and honest discussions with them during the planning stages to avoid additional shocks or consequences should a loss occur.


Changing Priorities

Almost everyone will experience changing priorities in retirement, but not everyone will experience it the same way. Regardless, you should expect the unexpected!


For example, many new retirees actually spend as much as if not more than they spent re-retirement because they’re so excited for the freedom to finally explore their interests via traveling and experiences. If planned for, this stage of retirement can feel incredibly rewarding! If not, it can take an unanticipated toll on your retirement savings.


The Bottom Line on Planning for Your Dream Retirement

Is your head spinning just a little? Don’t worry, you’re not alone. Retirement planning can feel a little dizzying with so many factors to consider, but the up-front work can make you feel much more prepared down the road, and can help you enjoy the unique retirement you envision for yourself.


If you’d like some help accounting for all of the standard and unique components that will make up your overall retirement picture, reach out to us. We’d love to help you get a handle on where you are now, where you’d like to be when you reach retirement, and the path or paths that can help get you there.


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