Pre-retirement: What Does it Mean?
By David Smyth
Unless you’re a Boomer, the word “retirement” probably seems far off and foreign, if not downright scary. As company pensions have disappeared in recent years, the gauntlet of saving for retirement has fallen solely on the individual employees. That means we are hearing more and more people answer the simple question of how long they plan to keep working with, “I’m going to work forever – or until I can’t.”
Retirement to many people conjures up images of quitting a career you love, joining a country club, learning to golf, sail and play tennis, and starting every morning with Bloody Marys at breakfast. But for many of you, that’s not the lifestyle you’d choose even if you had the choice. Luckily for you, this article isn’t about retirement – it’s about pre-retirement and what that means for you.
So, what is pre-retirement, you may be wondering? Generally it’s the time period of the 5 to 15 years after your last child brings home his or her last load of laundry! No matter how diligently you’ve saved as your family grew up, we know that clients can’t truly consider themselves a pre-retiree until the kids are done with education, have moved out and are paying for their own homes, cars and insurance.
If you’ve lived within your means and on a decent budget over the years, you should start to realize at this point that you have a little extra cashflow each month. That means you’re now facing some important decisions – what to do with those extra resources. This is the first stage of pre-retirement planning – the reallocation of those funds toward whatever your goals are – not your kids’.
Secondly, you’ll want to consider how your benefits are changing as your kids are dropping off of your insurance policies. Perhaps you’re also thinking about downsizing to a smaller home. You and your spouse can finally take that dream vacation too – without buying five plane tickets this time!
As you’re going through what we often term the second mid-life crisis, this is when you will turn to look at yourself and your own career timeline and goals. Do you really love your job? How long do you want to keep doing this? Perhaps you want to go back to school and start a second career that aligns with your new lifestyle. We see many clients at this life stage who are looking for more flexible hours – even if it means less income – instead of a job that pays more but perhaps keeps you on the road 44 weeks of the year.
Pre-retirement is not just about taking X number of dollars, putting them in A, B, and C investments, and letting them sit for 15 years. Pre-retirement planning is a point in time where you get to take a step back, reaffirm and perhaps redefine what you want your life to look like.
As you adjust to your new normal, you and your spouse will need to talk about how much longer you each want to keep working, where you want to live in retirement, what activities you might want to learn or take up, and what kind of lifestyle you’re looking for – not just in the next 5 to 15 years, but beyond.
At Family Financial Partners, we have found that people in this stage are often reluctant to start a conversation with a financial planner, not because they’re lazy, or too busy, but because they’re unsure of what they really do want. Suddenly, instead of making decisions based on how they’ll affect everyone, you can now shift gears into making decisions based on how they’ll affect those still in the household.
Pre-retirement planning is a daunting task, but one that everyone needs to go through. Keep in mind that you don’t have to have all the answers now. Some might have been made for you, for example if you know you want to be near kids and grandchildren, or if climate dictates where you can live for health reasons. Some of you may even be facing the dreaded layoff as corporations downsize to beat the almighty earnings-per-share gains that Wall Street demands.
In conclusion, the key to successful pre-retirement planning is to identify and work with a financial planner who will listen to you, be your advocate, and keep you and your spouse accountable during this new stage of life. That way, in time, as you do approach the “R” word – retirement – you won’t be told that you have to keep working. You can make that choice based on what you want.
So start today. Give us a call and let us know what questions and concerns you have. And if you know of someone in this situation, or who’s been recently laid off from their job, let us know so we can help them too.