Financial Planning answers many significant life questions. For example: How much do I need to save for my daughter’s education? Can I afford to buy a home? When can I retire? In my 27 years as a Certified Financial Planner™ (CFP®), the answers to those questions and others produce highly emotional and strategic impacts. Knowing the date when you can actually quit your job – with grounded certainty – lowers anxiety about retirement in general. You can see an actual date on the calendar, and even if that date is out 5 years or more, it creates a peaceful context in which to consider the retirement process.
Do I Need to Work Longer, or Work Part-Time After Retirement?
Another aspect of the question may be, “What if I cut back to part-time work during the retirement years? What difference will that make in my retirement income? Or, “What if I just work longer than I want to because it helps so much financially?” On May 13, 2019, Liz Weston, CFP®, a columnist for NerdWallet, wrote that for households saving 9% of their salary over 30 years starting at age 36, the University of Michigan’s Health and Retirement Study determined that:
The University of Michigan’s Health and Retirement Study, which follows thousands of people over the age of 50, announced: “Working longer has the biggest positive impact on a household’s standard of living in retirement.” Public policy professor Sita Slavov, of George Mason University, concludes that working longer is a positive message for people who have not saved enough for retirement, but it should not be taken as an excuse for younger people not learning to save regularly throughout their careers.
When Should I Start Social Security?
Delaying Social Security checks until age 70 and continuing to contribute to retirement accounts are also big factors in producing a successful retirement. Starting Social Security at age 62, the earliest age at which you can claim retirement benefits, permanently subjects you to receiving a smaller (perhaps inadequate) check. By waiting until age 70, a recipient’s check could be as much as 76% larger.
How Do I Avoid Regret with My Retirement Choices?
Developing a financial plan with a CFP® professional clears up all the above checkpoints. It could be that you do not need to work longer in order to achieve your goals, based on the assets you have already saved. Or, maybe cutting back to part-time for three years is the perfect solution. While building a financial plan before you set your retirement date gives you the best opportunity to create the retirement you want, a significant portion of our financial planning work is for clients who have already retired. Sometimes we come to realize with them that they are not on track to have the retirement they expected, and it’s true that sometimes working more years could have made the difference.
However, a financial plan is still a powerful guide even after your retirement date, and we use financial plans to help clients stay on track. Often, this means helping them put equity in their home to work, or helping them sort through expenses to make sure their budget is allocated towards the things that are most valuable to them, and reducing the rest. Everyone’s retirement will be different, and the choices and steps to get you there will be unique to you as well. A financial plan is designed to give you peace and confidence, whether it reveals that you’re already where you need to be, or if it gives you clear answers on how to get there. If you don’t have a financial plan already, it’s time to give us a call.