Retirement is about more than just having enough money to live on.
Transitioning from a full-time career to a full-time hobby / travel / grandparent enthusiast is a huge life change with a lot of moving parts.
Not only do you need to determine how much you need to live on, but you also need to figure out medical care, housing, and how to protect your estate when you’re gone.
Knowing what questions to ask before retirement will help prepare you for a smooth transition out of employment. Use the questions below to guide you through the answers you need to know before you retire, so you can be well-prepared in your golden years.
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1. When do I want to retire?
When determining what to think about before you retire, 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 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. But having a deadline will give you a target to shoot for and something to center your other financial goals around.
Your “when” will determine many of your answers to these questions.
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.
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 income for other things?
- Do I want to travel for a while and not even have an address?
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.
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.
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 or purchase health insurance from a private company.
To lower your costs in retirement, you could work longer to continue receiving lower-cost healthcare 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). 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.
6. How can I increase retirement income?
If you find that you’re going to run short of enough money to fund your ideal retirement, 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. Real estate rentals, investing in a franchise, 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. This includes your mortgage!
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 boost my retirement savings?
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 401K, you can also open up an 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 income are taxed, including social security.
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 retirement taxes.
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.
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 benefits 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 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.
This is not a question you want to guess at or leave to answer at the last minute. Do a little research, get some expert advice, and put a plan in place.
11. How long will I need my money to last?
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!
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 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 require ongoing maintenance.
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. Life, health, disability, and long-term care are insurance products 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?
This question depends on your answers to many of the questions above. But you’ll also need to consider your retirement income sources (pension, family trust, inheritance, investments, etc.) to have a good idea of how much you need to actually save.
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.
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 in 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 guesstimate of what your dream retirement will cost. As you get closer, and your savings gets larger, you will need to adjust your calculations and get more detailed.
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.
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.
How much you need to start saving today depends a lot on how much you’ve saved already. Most financial advisers recommend saving 10% to 15% of your income if you start in your 20s. Of course, the older you start saving, the higher that percentage needs to be.
Download this post as a PDF workbook so you can start planning your dream retirement!
Knowing what questions to answer before retirement is important
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 401K and contribute enough to receive the full match
- If your work doesn’t offer a 401K, 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?
What Questions To Ask Before Retirement (So You’re Well-Prepared)