Dealing with the uncertainties of retirement
As a private pilot, I often find the flight plan I so carefully construct prior to take off is subject to change with little notice. While I’m trained in making, literally, on-the-fly adjustments, the need to do so can induce extra stress.
So it often goes in retirement as well. Seldom do things go exactly as planned. Myriad things can happen after you hang up the proverbial shingle and settle into what you’ve planned for your retirement. Market downturns, unexpected illness, changes in your income needs or personal spending habits, perception changes in your risk tolerances once you’re no longer working, changing tax codes and Medicare premiums, and the list goes on. All these variables can sometimes lead people not to have a well-formulated retirement plan.
The truth is that having a plan, even if all the elements don’t play out as originally conceived is still better than going without a plan at all. I would never dream of going wheels up on a flight, without a flight plan and at least a few diversion airports identified and readily accessible in case weather or other factors impact my original plan. This complete plan with contingencies gives me confidence that I have the tools in place to handle unexpected changes once I take off.
Flying solo at- or post-retirement can present some significant problems and result in any number of unpleasant outcomes that will take the shine off the golden years you envisioned. Important decisions, some of which can’t be changed later, have to be understood and made. For example, most pension plans give you one shot at identifying when you’ll start to receive monthly benefits and who will be named as your survivor beneficiary. It’s much the same for your Social Security benefits. Once you make that choice, you can’t unmake it and the financial implications of those decisions can make or break your retirement dream.
The decision decade, the period of five years immediately before and immediately after retirement, is considered by many as critically important. Imagine five years before retirement as being the financial glory years. Your earnings may be at their peak and often major expenses like mortgages and funding college tuition are behind you. This is also a time some opt to expand their lifestyles and increase expenses in non-critical areas, like larger homes, fancier cars, or time share properties. These habits formed can continue during the five years after retirement when it becomes even more important to be following your financial plan you created before you retired.
Although I do advocate enjoying the fruits of your labor and investing in family enriching experiences, I do suggest you spend in alignment with your sources of retirement income including Social Security, employer sponsored retirement plans, individual savings, and employment or other income you might receive.
You want to make sure that your retirement plan allows room for you to have fun and enjoy your later life experiences as well as factoring in for the unexpected but inevitable events that impact your financial picture post-retirement.