Retirement planning is complicated. You have been in a savings mode for most of your life and retirement will be a big adjustment as you will be withdrawing money for the first time. You will also have a lot of available time, and you will want to devote that towards things that bring you happiness and fulfillment.

Some related questions we often hear include:

  • How much do I need to have accumulated for retirement without sacrificing my standard of living?
  • Can I afford to shift from full-time to part-time and still retire comfortably?
  • I am nervous that I might outlive my money.
  • How much do I need to have saved for healthcare expenses in my advanced years?

The first thing we do is to help clarify your goals and consider what you will do with the extra time that you have. Commonly, we see people doing more travel, finding a new hobby, buying a second home, or taking classes. Legacy goals would be things like funding education for grandkids or leaving a substantial amount to your favorite charities. Some others include helping adult children purchase their first home, taking the extended family on a vacation, or becoming more engaged with nonprofit organizations.

Next, we would look at your existing living expenses and determine how those would change during retirement. There are several phases of retirement where your expenses will look quite different, and the financial planning community affectionately refers to these as the “Go-Go years”, “Slow-Go years” and the “No-Go years”.

Three phases of retirement

During your early retirement years, you are likely to spend as much or more than when you were working because you are more active and have the time and energy to enjoy more experiences with family and friends.

In mid-retirement years, you have crossed off bucket list items and find more fulfillment staying closer to home. Your expenses during the slow-go years are generally much less.

And finally, we enter the No-Go years, which is where health constraints come into play, and you are therefore unable to do as much. Medical costs are highest in late retirement and comprise a large amount of your living expenses. Oftentimes, these costs can quickly erode wealth transfer plans such as leaving a legacy to loved ones.

Lastly, we review various Cash Flow scenarios based on expected expenses and returns on your investments. This includes when to begin taking social security, including weighing the benefit of delaying the start year to help increase your retirement income.

By clarifying your goals and learning how your living expenses will change during various phases of your retirement, this will allow you to better determine the right time to fully enjoy your next stage of life.