Are you asking the right questions about retirement?
Retirement is about more than just having enough money to live on.
Transitioning from a full-time career to a full-time hobbyest, world traveler, or supportive grandparent is a huge life change with a lot of moving parts.
If you want to understand the major milestones of retirement and manage your money strategically, you should evaluate your own personal financial issues to determine the best strategies to maximize savings.
Here are just a few questions about retirement you’ll need to address as you get closer to leaving the workforce:
- How much money will I need in retirement?
- How long do I need my retirement money to last?
- What will my expenses be in retirement?
- How will I pay for healthcare?
- When should I start withdrawing Social Security benefits?
- Do I need to get out of debt before I retire?
- How much will I have to pay in taxes?
- What do I want to do during retirement?
- What if I die before my spouse?
These may seem like boring details, but knowing what answers you need before retirement will help prepare you for a smooth transition out of employment.
In this post, I’ve addressed all of these issues, as well as several other common questions about how to prepare for retirement.
Use these questions about retirement to guide you in the answers you need to know before you retire, so you can be well-prepared in your golden years. You may also discover you’d like the input of a financial advisor for retirement to help you plan more thoroughly.
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14 common questions about retirement to answer
Do you feel prepared for retirement?
Even if your nest egg is already fully funded, it’s possible you’ve missed other important pieces of the big retirement puzzle. Such as, how do you want to spend retirement? Where do you want to live? How do you protect your assets? Where will your healthcare insurance come from?
It’s important to think holistically about the last phase of your life. Putting a comprehensive plan in place will allow you to live out your golden years with confidence and happiness.
Here are 14 common questions about retirement to answer, so you have a clear direction to take.
1. When do I want to retire?
When determining what to think about as you approach retirement age, having a timeline is helpful. Being clear on what should happen when will help you have an easier time of staying on track with your retirement goals.
Of course, one of the big questions to ask before you retire is when do I want to retire?
Instead of asking when can I retire, decide when you want to retire. Answering this question will give you a goal to shoot for, instead of passively accepting your current financial situation.
Of course, you’ll need to be realistic and make sure your goal is one you can actually reach. As long as you can afford to live on savings and other passive income streams, you can choose your retirement date.
However, you may want to be strategic about other time restraints you could be under, such as:
- When you’ll be eligible for company pensions
- When you can start receiving Social Security benefit payments
- When you can apply for Medicare
But, having a deadline will give you a target to shoot for and something to center your other financial goals around.
Of course, you can always choose a more gradual transition to full-time retirement. Perhaps you want to just work fewer hours instead of withdrawing from the workforce altogether. You may also want to start your own small part-time business with the decades of experience you’ll have. It all depends on your capability and desire for how to spend your days.
This is the time to consider all of the options available to you, and possibly consult with a financial advisor for some professional advice. Determining your “when” will greatly influence many other questions on this list.
2. How do I want to spend retirement?
When you consider how to think about retirement, don’t just focus on the fact that you’re no longer working. Yes, it will be nice for the first few weeks not having to wake up to an alarm clock every morning. But, unless you’ve got plans, you’ll probably get bored pretty quick.
The great thing about retirement is that your time is yours to do as you choose. Don’t wait until you sign your retirement papers to figure out how you’re going to spend it. Now’s the time to set some specific retirement goals.
It’s important to have a plan for how you spend your time for a couple of reasons.
One, having too much free time on your hands can lead to boredom, a lack of purpose, and even depression. Write down some things you’ve always wanted to try, or get better at, and that you’re capable of doing after you retire.
Two, if you dream of traveling the world or buying an RV and roaming the country, you’ll need to figure that cost into your retirement fund. You don’t want to wake up on your first day of retirement and realize you can’t afford to do what you planned.
Your retirement should be the best time of your life! You’ve aged in wisdom, your children are grown, and you can do whatever you want!
Make sure you know what you want so you can plan effectively.
3. Where will I live?
Once you retire, you are no longer tied down to a specific city or state. This means you are free to pick up and go where you want to!
Where you decide to live will depend on your priorities and goals:
- Do I want to live close to my kids and grandkids?
- Do I want to live in warmer/cooler weather?
- Do I want to sell my home and live in an RV?
- Do I want to downsize to an apartment so I have more monthly income for other things?
- Do I want to travel for a while and not even have an address?
- Do I want to live in a retirement community?
- Do I want/need to pay lower property taxes or have a lower cost of living?
- Do I want/need to live closer to premium healthcare facilities?
- Do I need to sell my current home and use the equity for retirement?
There are a lot of things to consider when you decide where you want to live in retirement. Figure out your priorities and goals so you can answer these questions for yourself. Be sure to talk your retirement plans through with others that may be affected.
Your housing will be one of your biggest expenses in retirement, so having an idea of the location and the cost will help you plan effectively.
4. What’s my plan to be debt-free in retirement?
Debt is bad enough when you’re bringing in an income, but it can be an even heavier burden in retirement. Debt can drain your retirement savings and keep you from enjoying your retirement to the fullest.
One of the most important questions to ask before retirement is how will I pay off my debt?
If you’re in a significant amount of debt right now, it’s probably going to take some time to get it paid off before you retire. You’ll want to figure out when and how that will happen.
Create a debt payoff plan that will allow you to enter your retirement years debt-free. That way, you can use all of your resources to enjoy your retired life.
Should this include your mortgage? You’ll have to answer this for yourself. It depends on your own personal preference or financial need.
If you choose to pour all of your discretionary income into paying off your home loan, your retirement fund may get neglected. However, going into retirement without a mortgage payment can drastically improve your financial stability.
Do the math and see which option will maximize your personal finances. At the very least, try to ensure you are paying the lowest interest rate available to you.
Now is a much better time than later to work on paying off your debt. You have much more important things to spend your money on in retirement.
5. How will I pay for healthcare?
Medicare insurance will be available once you turn 65, but there are several parts to this federal government program that you need to familiarize yourself with. The bottom line is that free Medicare does not cover everything and you will still need to pay healthcare premiums in retirement.
Of course, Medicare is not the only option for your healthcare needs. You could also apply for a “Medi-gap” insurance plan for additional coverage, or purchase health insurance from a private company.
To lower your costs in retirement, you could work longer to continue receiving more affordable insurance coverage through your employer. You could also contribute to a Health Savings Account now, while you’re working, so you can withdraw funds tax-free for medical expenses after you retire. Investing in an HSA could be one of the most important things you do before retirement.
Another important piece is long-term care (which Medicare does not cover). This type of insurance covers custodial care, such as assisted living or nursing home facilities. You could easily burn through your retirement fund by paying out-of-pocket, so get an insurance plan in place to protect yourself and your loved ones.
Keep in mind that healthcare costs typically rise as you get older, so be sure to plan accordingly.
Finally, consider getting a health care directive in place. This legal document will express your medical wishes if you are unable to make those decisions yourself.
6. How can I increase retirement income?
If you find that you’re going to run short of enough retirement money, you have some options to increase your income.
The obvious choice is to delay retirement by a few years and continue working. If your circumstances allow it, this option can provide several benefits, including:
- Continued access to employer health insurance
- Increasing your Social Security benefit
- Additional income to add to your savings
- Fewer years you’ll need to withdraw from savings
However, many choose to find something that requires more flexibility and greater satisfaction. You can go part-time, or even start your own side business using the experience you gained in your career.
You can also start setting up some passive income streams now that will supplement your savings in retirement. Business ventures such as real estate rentals, a franchise investment, and certain online businesses are great ways to develop additional income streams.
One last idea is to liquidate some assets like valuable jewelry, recreational vehicles, antiques, art, and fur coats. If you think you wouldn’t miss these things in retirement, sell them to increase your savings.
7. How can I reduce expenses in retirement?
Increasing your disposable income in retirement doesn’t always mean you have to make more money. Decreasing expenses can also provide greater cash flow, and you can start planning how to do that today.
You can definitely start with getting out of debt before you retire, as was already mentioned.
And, you can choose to live in a lower cost area if necessary. Couple that with a smaller home and you could cut your living expenses drastically.
Additionally, you can choose retirement activities that don’t put a huge burden on your budget. Maybe choose to take local road trips instead of international vacations.
Besides those choices, you can sell a vehicle (or two), rent out a room in your house, take advantage of senior discounts, and cut back on financial support for your kids.
Take these ideas into consideration when calculating how much you need to retire. Even if you don’t decide to implement any of them right away, it’s good to have a backup plan if you need to find more usable income.
8. How can I increase savings for retirement?
Aside from deciding how you will increase income and decrease expenses during retirement, this question addresses what you can do now to supercharge your retirement funds.
Your best strategy is to take advantage of an employer-sponsored 401(k) plan. At the very minimum, you should be contributing enough to get the full match your employer offers. But if you’re over 50 you can really boost your savings with “catch-up” contributions that go beyond the normal limits.
Besides the traditional or Roth 401(k), you can also open up an Individual Retirement Account (IRA) to increase your nest egg. Because an IRA is set up and controlled by the account owner and doesn’t involve an employer, you will have a greater degree of investment freedom with it.
Both funds are tax-advantaged retirement savings accounts. The 401(k) and IRA differ in a few ways, but both require contributions from wages and earned income. This means you can’t contribute investment or rental income to these accounts.
A second way to boost your retirement savings is to cut expenses and increase income now so you can put more of your current income into your savings for the future. If you feel you need to catch up, consider downsizing and/or getting a second job now and putting that money into a retirement account so your savings can benefit from compound interest.
If you don’t want to make drastic changes, you can instead choose to just be purposeful about avoiding lifestyle inflation and staying at your current standard of living. This means whenever you get a bonus or a raise or additional income, you don’t spend it to enhance your life now. Instead, you stash it into savings so it can grow and help you maintain your desired standard of living in retirement.
And lastly, another option to boost your retirement savings is to delay your social security benefit for as long as you can. For every year you delay the benefit, up until age 70, you will increase the amount you receive in the future.
9. How can I save on taxes in retirement?
Having a plan in place to reduce your taxes in retirement can increase your after-tax retirement income.
Both long-range and annual tax planning will create strategies that use various withdrawal periods and investment allocations to lower your tax bill. However, you must first understand how your sources of retirement income are taxed, such as pension income, traditional 401(k) and IRAs, and even possibly a portion of your Social Security benefits.
The important thing to know is that you must start planning early and be deliberate in your financial decisions to save the most on your state and federal taxes in retirement.
The variables differ widely and tax topics are complex, so the cost of a professional tax expert will likely save you from making some serious mistakes that could result in a significant financial loss. They can estimate a more accurate tax rate in retirement and maximize any tax benefits from your retirement and age status.
In other words, you will probably need to seek professional help to answer this question, but it will be worth it!
10. When should I claim Social Security?
If you can afford it, as late as possible. This will provide the greatest monthly benefit for you.
However, this is a very personal decision and there are other factors to consider besides just getting a little more income every month.
For example, if you take it too early and you’re earning more than the Social Security earnings limit, your monthly retirement benefit will be reduced.
And for each year you delay Social Security up until age 70, you will increase your benefits by up to 8%.
Something else to consider is if you lock in your benefit earlier than 70, you will receive reduced benefits as a lower monthly payment for the remainder of your life. Having extra money early on may sound good, but if you live beyond your life expectancy and your savings run out, then this decreased benefit could have a serious effect on your standard of living.
For married couples, there are ways to maximize your Social Security income based on how and when each takes their benefits.
Keep in mind that benefits typically have a 3-month delay after filing. You will need your Social Security card, valid ID with proof of age, previous year tax forms, and marriage or divorce certificate if applicable.
This is not a question you want to guess at or leave to answer at the last minute. Do a little research on the Social Security Administration website, get some expert advice, and put a plan in place.
11. How long will I need my money to last (life expectancy)?
Unfortunately, nobody knows how long they’re going to live, which makes retirement planning a little tricky.
According to the Centers for Disease Control and Prevention, the average life expectancy in the U.S. is 78.8 years. However, when you consider the meaning of the word “average”, you realize that 50% of Americans will live longer than that statistic.
Not only that, but the Social Security Administration says 25% of 65-year olds today will live beyond age 90!
There are longevity calculators to help you estimate your own life expectancy, such as this one and this one. But these are still just guesses.
The safest bet is to prepare yourself for a long retirement. Many financial planners are now advising their clients to plan for a life expectancy of at least 95 years old.
12. How can I protect my assets and my family?
As previously mentioned, none of us know how much time we have left. That’s why it’s important to put a plan in place while you’re still alive that will protect your wealth and your loved ones after you pass.
Proper estate planning can prevent unnecessary grief and complications for your family. It can also protect against costly taxes, lawyer fees, and probate fees.
An estate plan essentially prepares for the transferring of your assets to your specified heirs after you die. It’s meant to protect your assets through the transfer process and minimize tax obligations as well.
Estate planning also provides a guide for someone else to manage your assets if you are ever unable to do so. Including a living will in your estate plan can protect your family from making tough decisions if you ever become incapacitated.
The least expensive way to begin an estate plan is by creating a will. This very important legal document will communicate all of your intentions for your estate after you die. This will reduce enormous stress for your loved ones. Lawyer fees to write up a will depend on how complex your financial situation is.
The next step in an estate plan is forming a trust. A family trust can help you avoid probate and minimize estate taxes. This can potentially save your family time and excessive court fees. A trust is also useful for protecting your wealth from your heirs’ creditors and keeping your estate matters private.
There are several types of trusts and even variations within each state. All trusts need to conform to federal and state laws and typically cost substantially more than a will. You will need an attorney to help you create one, and it will likely require ongoing maintenance and keeping your beneficiaries current.
Another important component of an estate plan is insurance. Having adequate coverage in every major area of your life can protect you and your family from a variety of legal challenges. Health, disability benefits, and life insurance, as well as long-term care, are policies that most people think of needing in retirement. But other types like auto, homeowner’s, and umbrella policies are also important for protecting your assets.
To learn more about estate planning, read How to Set Up an Estate Plan.
13. How much money will I need in my retirement savings?
This question depends on your financial goals and the answers you’ve come up with so far. You’ll also need to consider your retirement income sources (pension benefits, family trust, inheritance, investments, etc.) and projected monthly expenses to have a good idea of how much you actually need in retirement savings.
There are 3 methods to estimate how much you’ll need:
- Percentage of pre-retirement income
- 25x rule
- FI (Financial Independence number)
Typically, financial advisors recommend that you save 10-15% of your income throughout your working years. However, if you’re a late saver, you’ll need to increase this percentage if you want to retire on time.
Another simple and quick method to estimate how much money you’ll need in retirement is by using the 25x rule. Basically, you multiply your pre-retirement take-home pay by 25 to calculate the total savings you’ll need to last 30-year period.
Also, your financial independence number represents the net worth you’ll need to accumulate before you can retire and live solely off of your savings. Calculating this metric should definitely be on your list of things to do before retirement.
Major factors that will affect how much you’ll need in retirement are your withdrawal rate and period, and your investment returns (or losses).
A helpful way to get an estimate of how much money you’ll need in retirement is to run some numbers through an online retirement calculator. A simple Google search will provide many to choose from, but I’ve heard great reviews about Personal Capital’s Retirement Planner calculator (you’ll need to sign up for a free account).
It’s important to decide what you want retirement to look like first, which is why this question is one of the last on this list. Remember, retirement is about much more than how much money you’ll need to just get by. It’s about how much you’ll need to support the life you want to live in your golden years.
If you have several years to still build up your savings, you’ll just need to write up a rough estimate of what your dream retirement will cost. As you get closer, and your savings gets larger, you can adjust your calculations with additional details that arise.
14. How much do I need to be saving today?
You’ve determined what you want your dream retirement to look like.
You’ve created a plan to eliminate debt, decrease expenses and increase income.
You’ve considered the costs of healthcare, taxes, inflation, and insurance premiums.
You’ve learned the importance of planning for longevity, and strategies for withdrawing your Social Security benefit.
You’ve used a retirement calculator to give you a good idea of how much you’ll need.
Now it’s time to use all of this information to determine how much you should start saving – now.
What is the amount you need to set aside on a weekly or monthly basis, so you’ll hit your retirement savings goal on time?
Having a professional financial planner would be very helpful for this step, but there are also many free websites and online tools that can get you started. An online retirement calculator is a helpful tool to use.
Once you have a target savings goal, implement that amount into your monthly budget. Treat it like it’s any other bill, that *must* be paid.
Then, pay yourself first.
Don’t wait until the end of the month to see what’s left. Set that money aside, preferably in a tax-favored, high-yield account, at the beginning of your budget cycle. Set up automated transfers so you don’t even have to think about it.
Once you make your financial future the priority, you’ll be well on your way to building a sufficient retirement fund.
Additional questions about retirement to think about
Even after you’ve answered these questions, there will inevitably be more that pop up.
Below is a list of additional retirement issues that you may encounter during the retirement planning process. If the question applies to your situation, carefully consider how your answer fits into your big picture plan.
- Will you and your spouse/partner retire at the same time?
- Should you get a retirement annuity?
- Will you take your pension as a lump sum distribution or annuity?
- Should you work past 65 to save more money?
- Should you retire early?
- How will you handle your money in retirement?
- What spousal benefits are there if you die first?
- Do you have a backup plan if your retirement fund has significant losses?
- Where will you keep all of your important financial and estate documents?
When does the average American worker retire?
According to 2021 data from the Center for Retirement Research at Boston College, the average retirement ages for men and women are 65 and 62 (respectively).
What factors affect your retirement age?’
There are several unique factors that will impact your age at retirement. Some of these include the amount you have in savings, the cost of living and lifestyle you expect to achieve, where you want to live, and your health upon retirement. Each of these circumstances will have a significant influence on your retirement timeline.
Is Social Security going to run out of money?
The SSA website states that benefits are “expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.” After that time, it’s possible that retirees will only receive 78% of their full benefit if Congress does not step in and address the funding issues with the program.
How will retirement change my life?
Besides the obvious changes, such as no longer being employed and generating an income, retirement can have a huge effect on your emotional, mental, and social states as well. It’s important to have retirement goals for every area of your life, so you continue to live your life with purpose.
What are the biggest retirement mistakes?
Possibly the biggest mistake you can make for retirement is waiting too long to start saving. Money needs time, coupled with compound interest, to grow into a sizable nest egg that can last for the duration of your retirement. Other big mistakes that retirees have confessed to include not having enough insurance, neglecting an estate plan, claiming Social Security too early, and going into retirement with too much debt.
What are the biggest financial risks in retirement?
Even if you plan diligently and save purposefully, there are still risks that await you once you retire. One of these is outliving your savings, which is why it’s important to stick to a budget once you stop generating an income. Another big risk is not being able to afford health care and medical bills. You can minimize this risk by having enough insurance, such as health insurance, long-term care, and and umbrella policy.
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Knowing what questions to answer before retirement is important
Don’t make retirement planning a guessing game. There are practical and specific steps you can take so you’re prepared to retire on time.
Surveys have shown that half of working households in America are at risk of not being able to maintain their standard of living when they retire.
Perhaps you feel like it’s too late to even wish for a comfortable retirement. Maybe you’ve decided that you’ll need to be working long into your old age in order to stay afloat. Or maybe you have some fear about how you’re going to take care of yourself when your health starts to deteriorate.
I have three words for you: Don’t give up.
However much time you have until retirement age, you are capable of changing your retirement destiny.
The important thing is to start! If you’ve been putting off funding your retirement, start today.
- Sign up for your employer’s 401(k) and contribute enough to receive the full match
- If your work doesn’t offer a 401(k), open an IRA and make your contributions automatic
- Get on a budget, find the leaks in your spending, get out of debt, lower your expenses, and put your savings into an interest-bearing account
The more time your money has to grow, the more you’ll have in retirement. So don’t delay – start coming up with your own answers to these questions and plan your way to the retirement you really want.
Other posts you may enjoy:
- Financial Peace Series: The Critical Role of Insurance
- The 401(k) and the IRA: Which One Is Better?
- The Late Starter’s Essential Roadmap For Retirement
- Ultimate Estate Planning Checklist & Guide
- Get Your RISE Score: 5 Steps To Determine Retirement Readiness
- Should You Use The 4% Rule In Retirement?
- 7 Steps To Catch Up On Retirement Savings
- 12 Effective Tips For Financial Planning In Your 50s
- 50 Good Money Habits To Help You Save More
- What Happens If You Don’t Have A Living Trust?
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