Welcome to the Twilight Zone, a.k.a., The First Stage of Retirement
Yesterday was my last day of ‘official’ employment! I am now entering the first stage of retirement, or some might say, the “twilight zone.”
I opened up my computer and found that my company email had been blocked, my calendar had changed, and all contacts had been erased. But I also had an outpouring of well-wishes on my Facebook page that was very encouraging.
“Congrats!! You are gonna love it. You still work, but you don’t HAVE to. Sounds like a good title for a book, huh?”
I think that resonated with me! My new book, When Work Becomes Optional is moving up the charts on Amazon!
My wife asked me yesterday about my plans for retirement. I thought that she was asking for me to outline what I intended to do in retirement and was taken aback as we had discussed this often in the past.
But upon clarification, what she really was asking was about plans in the near term, like tomorrow and next week. I hadn’t thought of that, but I told her playing golf was certainly on the schedule! She also reminded me of a doctor’s appointment next week – a bummer, that one.
It seems like my new calendar will be filled with golf, dinners, shopping, haircuts, day trips, weekend get-a-ways and doctor’s appointments.
Transition into Retirement
Okay, so here is the thing about the first stage of retirement – it is called ‘transition’ for a reason. Maybe you have been thinking about this day for some time, but when it actually comes, it may cause you to think that all those plans you’d been making for retirement may not happen because you no longer have a paycheck!
Where is the money you’re going to need going to come from? If you did not have this conversation with your significant other before you retired, I guarantee you will now.
This is one of the most critical aspects of entering retirement. The feeling of not having a paycheck and trying to get your head around the idea of spending what you have saved. It just does not feel right.
Many people share that they plan to live on the income from their investments without touching the principal.
Review All Income Resources
For some, this may be a possible scenario, but for the vast majority of people entering retirement it is not realistic.
So here is a suggestion: sit down together with a trusted advisor or friend and develop a simple spreadsheet that outlines all of your income resources. Then project the amount of annual and monthly income.
This should include the present value of an account and the projected income from that account. Also, show the expected dates you plan to start Social Security retirement, pension income, IRA distributions (both traditional and Roth), and after-tax portfolio and savings withdrawals.
In doing so you will begin to get an idea of where money is coming from to meet your living needs.
Identify Assets for Emergencies and One-Time Events
You will also identify assets that will not be generating income but will be held in reserve for emergencies or one-time events like a trip or home/auto repairs.
You will be making decisions about when to begin Social Security, taking IRA distributions before they are required or waiting until you have to begin making the Required Minimal Distributions (RMDs) at age 70&1/2, and how much to withdraw from personal after-tax investment and savings accounts.
Once you have this spreadsheet filled out, you will be able to determine how best to make the withdrawals in the most tax-efficient way. This may need some help from your accountant or advisor to calculate the net after-tax income that you will actually be able to spend for your living expenses.
My suggestion is to look at blending the income from different resources to utilize both the taxable accounts and after-tax accounts that will keep you in the lowest tax bracket.
Make Regular Deposits into Your Bank Account
I would also suggest that you have deposits made into your bank account similar to when you had your paychecks deposited so that the cash flow in retirement is the same as when you were working. That way you maintain the ‘normal’ routine of knowing when monies will be available.
This method may mean that you begin withdrawals from the IRAs before you are required and preserve more of your after-tax personal investment and savings accounts.
If you have difficulty with setting up a spreadsheet, just ask your grandchildren to help you!
What have you planned for your retirement? How did you feel when you woke up on your first post-work day? What was on your calendar the first week of your retirement? Do you know what your retirement income sources are, when you are going to begin receiving that income and for how long? Please share in the comments below.
Stan Corey has been a Certified Financial Planner Professional (CFP), Chartered Financial Consultant (ChFC), and Certified Private Wealth Advisor (CPWA). He has worked with individuals, families and small businesses for almost 40 years. Now retired, he consults assisting clients with estate settlements. Stan is a financial advocate in divorce cases working with family law attorneys and speaking at various professional conferences. His first book, The Divorce Dance, was a best seller on Amazon and his new book When Work Becomes Optional is now available. Please visit his website www.thedivorcedance.com.