Closing In
Your Retirement Date is Closing In
Should you get more conservative in your investments?
The Closing In Stage
Closing in means you can see the finish line. As you near your retirement date, you may wish to become a little more conservative in your investments. “Protection” may become your motto as you get closer to using your retirement funds. During this stage, you may also need to adjust your goals to align with changes that have occurred through the years. With retirement “closing in,” you’ll be able to better judge how your retirement savings will sustain you in your retirement years.
Thirty-seven percent of people retire earlier than they planned. 1
Did You Know?
A top concern for many people approaching retirement is whether they’ve saved enough money — fearing they’ll outlive their savings. And that’s understandable: It’s hard to know exactly how much savings you’ll need over the course of retirement given all the big unknowns, such as what age you’ll live to, inflation and its effects on your cost of living, and your future health care and long-term care spending needs.
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Eight in 10 workers think they will work for pay in retirement, but based on retiree experiences, only 28 percent actually do. 2
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The most popular age for claiming Social Security is also the earliest age at which you're eligible for (non-disability) benefits. 3
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If you wait until you turn 70 to start getting Social Security, you will receive 132 percent of your FRA benefit. 4
Unless Congress enacts reforms, the Social Security trust fund will run out of money by 2035. No problem for a planner. 5
The Basics
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The Social Security Administration's website, ssa.gov, features a retirement estimator calculator that allows you to estimate your retirement benefit based on your actual earnings record. You can also sign up for a my Social Security account so that you can view your online social security statement. This statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits.
If you're not registered for an online account and are not yet receiving benefits, you'll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter.
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When you retire is a very personal choice, and it depends upon your own personal circumstances and preferences. Remember, though, if you collect social security before your full retirement age, your benefit will be permanently reduced. Depending on the year you were born, you'll receive 25-30% less per month if you collect benefits at age 62 than if you wait until full retirement age to begin collecting benefits.
Of course, if you begin collecting benefits at age 62 and live to an especially old age, you may end up getting more money because you’ve collected more benefit checks.
There are many factors to consider and the Social Security Administration (SSA) has several online benefit estimators that can help you make an informed decision. Find them at ssa.gov (if you’d rather talk to an SSA representative, call 800-772-1213. You can also sign up for a my Social Security account so that you can view your online social security statement. This statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits.
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There’s no standard yes or no answer. It all depends upon your medical history, your age, your assets and your income. Medicare, HMOs, and Medigap won’t pay for home care, nursing home care, or other assisted-living arrangements, so you may want to consider it if you meet some of the following criteria:
- You are between the ages of 40 and 84 (generally, LTCI is not available to those over 84).
- You are in good health and are insurable.
- You can afford the cost of premiums now and will be able to afford them in the future.
- You own substantial assets that you'd like to protect.
- You have family members to whom you wish to leave your assets.
- You have a family history of Alzheimer's disease.
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Now. Your exit strategy and the subsequent transfer of power can be a complicated and emotional issue. The sooner you make a formal plan, the sooner you can start to groom the next generation of business leaders or keep things on track for a successful sale, if that’s what you prefer.
The key is deciding now what you want the future of your company to look like. Do you want control of the company to go to certain people, or do you want to provide for those people without leaving them the responsibilities that go with running a business? Both courses of action require prudent planning on your part. In fact, the process could take years. The right business succession plan will help you make important decisions about ownership, maximizing your company's value and identifying beneficial tax strategies.
You're Closing In. What's Your Plan?
You’re getting close to retirement. Now, more than ever, you need to have a plan in place. No less than one year from your planned retirement date, you should:
- Get your debt in order.
- Maximize social security.
- Make sure your allocation fits your income needs.
An advisor can help you with all these points (we even have social security analysis software). So why wait? If you sit down and do these things, you can walk out the door with a better understanding of what you can spend in retirement. And that’s a good feeling.
Go-Go. Slow-Go. No-Go.
In retirement, your spending will likely change over time. In his book, The Prosperous Retirement: Guide to the New Reality, Michael Stein introduces three distinct stages of retirement.
Go-Go
You’re still pretty active in this first stage and spending more than in any other stage. This is where you may travel, take up new hobbies and spend time (and money) on the grandkids. This stage typically lasts until age 75.
Slow-Go
Around 75-85, the energy starts to slip and the pace begins to slow. Homes are downsized and spending is too. In fact, annual expenses typically decline 20-30 percent in this stage.
No-Go
As you pass 85 until the end of your life, your world and your expenses tend to shrink. The one exception, of course, is medical and long-term care costs. Planning for these uncertain expenses is one of the greatest challenges of retirement planning.
Draw-Down Strategies
When you cross over into retirement, you will begin using your retirement income for daily living. Which draw-down strategy is best for you?