April 26, 2022

The Great Resignation has dominated headlines for the past year or so, but have you heard about The Great Reconsideration? If not, it’s a real thing, and it’s something you need to evaluate if you’re closing in on retirement or thinking about doing so early.

You’re probably asking yourself, “What is there to reconsider?” Well, a lot, actually.

Anyone who’s been through a life cycle event, a death scare, a terrible illness, or a life-changing event (think of COVID-19) typically re-examines their life. They don’t always emerge from such experiences the same as they were before. There are a variety of factors to consider, and not everyone will check all the boxes, but the pandemic has served as that catalyst for many individuals who are now re-establishing their priorities.

Are you truly prepared to take the leap earlier than you previously expected? Keep reading.

What Changed?

COVID gave you a taste of a more simple life… out of necessity. Travel was reduced. Plays, concerts, and sporting events were put on hold. Eating out wasn’t a regular affair. That led to fancy cars sitting idle more frequently.

You were forced to be more bohemian and live a simpler life. And you’ve learned it ain’t so bad. All of this impacts your thought process and makes you question, “Do I need the new or fancy car when I can drive around in a little Honda? Do I need all these things?”

The past two years had you involuntarily test a new budget, a more spartan budget, and now you know you can live fine like this. It’s no longer abstract. You feel it, you touch it. You learned the dreaded retirement years aren’t so dreaded. You saw those days can be fun, productive, and livable – albeit different than you initially thought. But this “test run” was only two years; can you continue that for the next decade or three?

How Does That Impact Your Plan?

The perfect sun shower of good market performance, 401(k) growth, and cutting expenses led to assets stockpiling while cash needs dropped. You exceeded your wildest expectations and believe you’re ahead of where you need to be financially to retire. Something that was years in the future is now close to the present, and it gives you the ability to really see it as a reality.

Married couples are plotting their Social Security collection strategy, pondering if they claim themselves only and let their spouse build a little higher benefit. Individuals are determining if they should take Social Security at 70 or earlier. Do you plan to move? If you’re going to retire to Florida, should you buy something now in advance so you don’t get priced out of the appreciating real estate market?

More and more individuals close to or at retirement age look at the past two years and say, “I’m ready.” But are you? 

Whereas you needed three to five years before the pandemic to plan your retirement, your timeline may have shrunk. One of the biggest questions you need to ask yourself is if you can work a little longer to replace a few zeroed-out work years when you weren’t working so you can goose up your Social Security benefits.

What Are Your Hobbies and Plans?

This may seem silly, but, in reality, it’s one of the top questions when you’re considering pulling the ripcord: what will you do in retirement? Most people respond, “I don’t know what to do. I’ve always pretty much just worked.” But here’s the a-ha moment: COVID forced you to take up new or revive old pastimes – hiking, walking, gardening, fixing up the house, and cooking at home, just to name a few – activities way past being proud of your loaves of sourdough bread.

Look at the backlog for items such as exercise equipment and patio furniture. Sure, supply chain issues are part of that, but being home for two years led to that simpler, more domestic – and less costly – life mentioned above.

However, some people are dangerous in retirement from a financial perspective. Many say, “I’m gonna join a golf club. I’m gonna buy a boat. I’m gonna travel the world. I’m gonna buy the convertible. I’m gonna… I’m gonna… I’m gonna…” Can you afford all that today and for the long haul?

Be Careful of This Pitfall

All too often, individuals retire and discover they were wrong on their numbers a few years down the road. The old rule that if you spent 4% of your assets every year and you’d be fine is no longer true. You need to rerun the numbers today and consider a cushion. The pitfall happens when you realize you need to return to the workforce after a few years.  

You’re now stale in whatever your vocation was. You may or may not be able to find the appropriate job. No one wants to become a Wal-Mart greeter at 80 or go to their children to say, “I ran out of money, and I need your help.”

How Do You Know If You’re Ready?

If you are selling a business, you want to get it as attractive as possible before putting it on the market. The same thing can be said for your life post-retirement.

You have to review your financial situation and life goals for today and beyond to plan accordingly. Today may seem like the right time, but don’t make the jump until you have someone challenge you.

Consider your residence. The family homestead was good for raising your family, but as you get older, stairs are dangerous. You want the bedroom on the main floor or a one-story home. This is just one of many questions to ponder.

You don’t want a yes-person to tell you you can do it. You want someone who will challenge your plan to ensure you’ll have enough, not to say you’re wrong, but to ask, “Did you think of this? Did you think of that? What about…?” It’s an uncomfortable process with hard questions, and they’ll challenge you, but it’s all for a good reason! We’ve yet to have anyone come back to us and say “I’ve got too much money.”

The push to re-evaluate and potentially bump up your timeline has never been more prevalent than it is today. You’ve seen what happens with COVID, and you realize you may not be able to travel, bike, camp, or do whatever is you want to do in retirement. The reality of losing a spouse or mobility also impacts your mindset because you’ve seen it firsthand or through someone you know, and you want to enjoy life now. 

Every year makes a difference financially, and every detail must be examined from all sides. Contact the Friedman + Huey team today to consider these issues and more to have the best shot for stress-free golden years.