By Dr. Stacie Rhodes
Editors Note: Over the next few months, Stacie Rhodes will be sharing strategies for financial readiness for each decade of our lives.
Toddlers can often get a bad rep for all their questions – especially when asking “why” after every verbal command. But the beauty (and exhaustion) of that season is their missing mental filter. The most inquisitive ones will not stop asking questions until their little mind is satiated by your answer or distracted by the next task. Allow me to encourage you to revert back to those inquisitive days and ask all of your questions as you segue into your next season. You are entering unchartered territory with your purpose being challenged, your routine changing, and your lifestyle adjusting. Consider the following as you navigate this new season.
“Retire to something, not from something.” While the long days and countless hours at work may often serve as the burning motivation to retire, recent studies show that a purposeful life reduces the risk of early death. For the first time, this research revealed that a sense of purpose in life is associated with specific causes of death. Purposeful living has a broad implication of having goals in life, which can include the following: family and relationships, community, helping others, learning new skills, and taking part in leisure activities or hobbies.
Follow-up Questions:
- What gives me purpose?
- How can I leverage the knowledge and skillset I’ve gathered in this next season?
- How much is needed to fund my purpose and lifestyle?
- How will I fund my purpose and lifestyle?
Evaluate your retirement savings – including pensions, 401(k) plans, IRAs, or other retirement accounts. We previously discussed limiting withdrawals to around 4% of retirement savings each year. This percentage is based on the goal of spending the interest earned on your investments rather than the principle of your investment, allowing the spread of your investment over several years. We want to continue to evaluate progress on meeting retirement income goals and consider strategies to maximize savings in the remaining years before retirement.
Further, I encourage you to review your investment portfolio to ensure it aligns with your risk tolerance and retirement timeline. Consider shifting towards more conservative investments to protect your savings from market volatility while still aiming for growth.
Finally, remember to include your Social Security benefits and evaluate the best time to start claiming them. While you can start receiving benefits as early as age 62, delaying can result in higher monthly payments. Consider your health, longevity expectations, and financial needs when deciding the optimal time to begin receiving benefits.
Follow-up Questions:
- How much annual income does my current lifestyle require?
- How will my lifestyle change in retirement?
- How much annual income will I need to sustain my purposeful retirement lifestyle? (Utilize free online calculators to estimate this.)
- When should I (and/or my spouse) start claiming Social Security based on the lifestyle funding needs?
- What lifestyle changes do I need to adjust to meet my goals?
Understand your healthcare needs and costs in retirement. One of the most significant costs in retirement can be healthcare – if you do not appropriately plan and estimate your healthcare needs. Investigate Medicare coverage options and consider purchasing supplemental insurance to fill gaps in coverage. Because this topic can be confusing and frustrating, consider connecting with a Certified Financial Planner (CFP®) to discuss details and/or recommend a Medicare expert.
Follow-up Questions:
- What are the basics of Medicare and my coverage options?
- Should I enroll in Part D?
- Am I eligible for assistance to help lower the costs of Medicare?
- What resources can help me navigate Medicare?
Update your estate plan–including your will, trusts, and beneficiary designations on retirement accounts and insurance policies. I will reemphasize the importance of an ongoing evaluation of your plan for asset distribution and its impact on those entrusted with inherited resources. I encourage you to confirm your requests regarding asset distribution, healthcare decisions, and guardianship are clearly outlined. Because of the implicit intricacies, consulting with an estate planning attorney can help navigate complex legal considerations.
Follow-up Questions:
- Are all of my beneficiary designations on all legal documents, bank accounts, and retirement accounts current?
- Who will be the Executor or Personal Representative of my estate, and what responsibilities will they have?
- What is the potential impact of these resources on the beneficiaries?
- How can I help prepare the beneficiaries for receiving these resources?
You have earned the right to ask these questions (and more!) to protect yourself and your hard-earned resources. Do not settle for confusion. Continue to explore each topic and area until you are clear on the basics and next steps.
ABOUT THE AUTHOR
Dr. Stacie Rhodes serves as the Associate Dean for the School of Business at Liberty University, as well as the Executive Director of the Liberty University Center for Financial Literacy. Her passion is empowering women with essential financial education to walk confidently toward financial freedom. Stacie received her graduate degree from NC State University and her doctorate from Liberty University while holding CPA, CFP®, and CKA® designations. She enjoys building relationships with her incredible community, vacationing in places with beautiful beaches, and traveling the world with friends and family.
