Transitioning into Retirement? Do These 5 Things First!
Have Open and Honest Conversations with Spouse/Partner About Your Retirement Journey
Having an honest conversation with your spouse or partner about how you envision your retirement – including each of your greatest concerns, fears, desires and wants – is an essential step during this stage.
Consider having each partner separately write down what their thoughts are about retirement, and make a list of what is really important. Afterwards, compare the two and see where there are common interests, concerns and feelings and where there are differences.
This presents a great opportunity for a constructive conversation that will help you enter the journey of retirement. If you are diabolically opposed, then maybe you will need a mediator!
Form a Team of Professionals That Will Provide You Guidance
Once you realize that all the years you spent saving for retirement now come down to making decisions that may affect the rest of your life, you may also realize you cannot go it alone – even if you’ve gone it alone up to this point. The reason is that everything you know or think you know is about to change!
When couples are transitioning into retirement – and as someone who’s evaluated people’s financial lives for his entire career – I can confidently say that in most instances, one spouse has a better grasp of the couple’s finances than the other.
Quite often, the knowledge gap is huge. In other words, one spouse knows everything about the couple’s financials while the other person is essentially financially illiterate.
If the spouse with the high level of financial knowledge outlives his or her partner, this will most likely result in a financially smooth transition from partnership to singlehood.
If, however, the spouse with less or no financial knowledge outlives his or her partner, this could result in stress and loss of money as a result of poor decision making. So, if you’re the one who has been mostly on the sidelines managing your family financial affairs, it’s time to get up and get into the game.
Even among financially savvy couples, forming a team is usually a good idea. This group of professionals includes some or all of the following: estate or elder law attorney, CFP, CPA, banker and an insurance agent. A combination of these experts will best serve your long-term interests.
By bringing them onto your team, they will play an essential role in developing your real retirement plan. You’ll leverage their expertise in order to help you make better and more informed decisions that may affect you, your spouse or partner and the future generations.
In regard to the financial expert who is part of your team, I recommend hiring one with a CFP designation. I am a financial expert who chose to earn the CFP designation because I believe in the continual education, fiduciary responsibility and code of ethics.
CFPs are trained in playing a central role coordinating the other members of your team. Think of them as a coach who makes sure the game plan is solid, and then works with team members to ensure the plan is monitored, revised and maintained in order to accomplish your overall goals and wishes now and after you pass away.
Keep Family Informed of Your Plans
A key component of a real retirement plan is to involve your family as you develop and implement it. This will increase the likelihood that your wishes will be met, your family members will act in your best interest, and you’ll avoid conflicts among family members when you need their help the most.
Keeping your family informed can be as simple as asking the person you wish to be the executor or successor trustee if he or she will, in fact, want to serve in that capacity.
I’m a strong believer in family meetings, especially in instances when you have a large family and siblings with differing opinions. During a family meeting, you’ll inform your loved ones of your intentions and about the person who has been designated as the executor or trustee.
In addition, you’ll point out if you have any special provisions for one person, such as a child who may be incapacitated or one who has chosen to be in a career – charitable, religious or other type – that does not provide an opportunity to create a sustainable financial wellness.
If you have charities you are supporting, you may need to identify them and how you wish to help them upon your death.
Update Financial Statement Yearly
Having up-to-date financial statements is an effective way to level the knowledge playing field between couples. If your spouse is less informed about your combined financial status, reviewing financial statements with him or her is an effective way to begin the education process.
A good time to do this is when you file your tax returns because this is when you’ll have compiled the majority of your important financial documents in one place.
While you’re having financial conversations with your significant other, tax season is also a good time to keep your family informed of any major changes to your retirement plan.
Many people may be uncomfortable having these conversations with family members. However, let me assure you, if you’re not talking about your financial situation with them, they are certainly talking about it amongst themselves!
So, rather than have them base their conclusions on speculation and conjecture, I recommend giving them the facts – if your family dynamics allow this level of communication. You should also keep them informed of any medical changes that may affect your retirement plans.
As you progress through the retirement stages, your concerns about having enough resources to provide for your long-term needs will most likely increase. I recall one client telling me, “My dad didn’t expect to live this long, and now he’s worried about running out of money!”
By obtaining and reviewing your financial statements regularly, as time passes, you’ll have the information necessary to make wise course corrections. These will allow you to prepare for the future more effectively than would otherwise be the case.
Lastly, check your credit bureau annually. From foreign hacking to stolen credit cards, personal identity data breaches are part of modern life and are often out of our control. What we can control, however, is our vigilance over our prized personal identities and credit.
To avoid the headaches related to identify fraud, obtain your free annual report that will alert you of any issues that may need to be resolved, and sign up for identity-theft protection. The cost of enrolling is worth the peace of mind and the services you’ll receive.
Update Estate Documents at Least Every Five Years
Hiring an attorney to draft an estate plan is one of the preliminary steps in the estate planning process. Laws and your personal circumstances are always changing, and you need to be on top of any issues that may affect your estate plans.
In addition, unlike a trust, powers of attorney and medical directives have a shelf life, so they need to be updated and re-signed in order for them to be valid at the time you need them.
If you are already retired, what steps did you take to make the transition smooth and efficient? If you have not retired yet, what steps are you taking to get prepared? Please share your insights and experience in the comments below.
Stan Corey is a CFP, ChFC and CPWA providing financial life management for more than 36 years. Stan has published a novel, The Divorce Dance, which is a story about a divorcing couple whereby the wife, Natalie, guides the reader though the divorce process and how to have a respectful divorce. Please visit his website.