Retirement readiness is a concept many people may not realize how many factors to consider. In my experience, here are the most prevailing:
Lifestyle: as we plan for retirement, we should consider when to retire, where to retire and the levels of activities we want to enjoy during our retirement years. Since many people enjoy over 20 years in retirement, we should consider three phases on retirement. 1) Go-Go years when we have an active lifestyle, 2) Slow-Go years when we are starting to slow down due to physical or health condition, and ) No-Go years where due to illness of Long Term Care conditions we are in need of medical or personal care.
Sources of Income: here we should have a clear accounting of our budget and Cash Flow ; what sources of income we will have during retirement such as pensions, Social Security, Investment Income, Passive Income as well as fixed expenses and variable expenses. When to apply for Social Security benefits is a very important consideration before retirement.
Longevity: as we all heard in the news, people are living longer, even beyond 100 years of age. The question is: is your money going to last as long to take care of your lifestyle?
Public Policy: Also in the news is the impact to our retirement lifestyle when the government makes changes to benefits we are expected to receive, such as Social Security, Medicare. Also, we need to realize how tax law changes may impact our lifestyle in retirement. Consult with your tax advisor to stay abreast of your tax situation.
Legacy planning: Consulting with an Estate Planning attorney is important to ensure your wishes are well documented and executed. You should periodically review your Will, Testament, Trusts, and Powers of Attorney.
Other: these are the unknown that life throws at us. For example: premature death of a loved one, the need to help a family member in distress, an unexpected lawsuit. These are life’s surprises that sometimes are hard to plan for. Here is were having adequate insurance comes in handy.
Investments: Are your investments well diversified? What if the market takes an unexpected downturn? Is your portfolio in line with your Risk Tolerance?
Inflation: does your budget account for inflation? How do your investments account for inflation? Do you have enough emergency reserves? Does your income have a cost of living adjustment (COLA)?
Healthcare and LTC: Do you have enough coverage to cover your medical bills including co-payments? How about prescription coverage? Do you need Gap Medical Insurance? Can you continue with your current employer’s medical benefits until you reach 65 for Medicare enrollment? With over 70% of people age 65 facing a potential LTC need, do you have resources to cover LTC services? Do you want to be taken care at home or in a facility? Do you depend on family members to take care of your activities of daily living?
As you can observe, Retirement Readiness requires a thorough and continued planning taking in consideration the many factors that can impact your retirement.