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January 13, 2022

Retirement Planning Doesn’t Stop When You Retire

How to keep up with your goals once you have actually stopped working. Setting your target savings number right is an important part of the retirement planning process, but it’s just one thing to consider. Making sure you’re able to achieve and maintain your goals after you’ve retired is another.

This is why retirement planning doesn’t stop when you retire. Setting goals, creating an action plan for achieving them, and reviewing both regularly throughout retirement can help keep your finances on solid ground.

Biggest Goals of Retirees

The biggest goals for retirees and pre-retirees include traveling, spending more time on leisure activities, spending more time with family, and relaxation.

Your vision may feature other goals, but regardless of what you want to accomplish, the start of retirement is not the time to take your foot off the gas when it comes to retirement planning.

Why Assess Your Financial Needs After You Retire?

Your financial picture changes with any big life transition, and retirement is no different. Your income streams as well as expenses may be similar to what you projected, or they might be different. So you’ll need to adjust as you go.

You also may be dealing with new-to-you financial issues, such as managing required minimum distributions from tax-advantaged retirement accounts, navigating Medicare, and more. Add in market volatility, social security planning, and inflation, and you’ve got a complex picture. So you’ll want to make sure there’s some wiggle room in your budget.

Use the Bucket Approach

As you move from saving to spending in retirement, consider how you’ll divvy up your assets. Splitting assets into individual “buckets” can help you better plan spending.

The first bucket is your short-term, which is two years or less. That money should be in cash or very short-term bond investments.

The middle bucket is your three- to six-year bucket. This bucket will periodically replenish the short-term cash need bucket.

The third bucket is your long-term bucket, which may have more stock exposure, potentially allowing for more growth. Since it’s intended to be longer-term, there is less concern about short term market fluctuations. 

Match Goals to Buckets

Once you’ve set up your buckets for spending, you can then decide which goals each one will fund. 

Keeping three months to a year’s worth of expenses in a liquid savings account can help you cover any unexpected costs you might encounter.

The middle bucket could be what you draw on to fund your lifestyle goals, such as starting a business or traveling more often. Reviewing your assets, income, savings rate, and investment returns can help you determine how much you can afford to spend on travel, and where that money will come from.

The third bucket can be helpful in planning for what can easily be your biggest retirement expense: healthcare. A couple retiring at age 65 in 2020 would need $295,000 to pay for medical expenses during retirement. That figure doesn’t include the additional cost of long-term care.

According to HealthView Services, a healthy 65-year-old couple retiring in the U.S. in 2019 will need about $606,337 to cover healthcare expenses during retirement.

Prioritize Needs and Wants

As you shape your financial plan in retirement, consider what’s most important. Retirees need to figure out what constitutes a spending necessity in terms of meeting basic living needs, any “wants” they have that aren’t necessarily critical to daily survival, and what falls into their “dream” category.

Then, do the math. Figure out how much is needed for each and have that much set aside for that purpose. Leave room for new needs that can arise as you move through retirement, such as healthcare. Most importantly, be realistic about what you need to enjoy a comfortable lifestyle.

If there’s a gap between your savings and income and your goals, think about how you can close it. That could mean reducing spending, delaying your retirement date, or working part-time once you’ve officially retired. All three could help to bolster your savings and increase your retirement income.

The Bottom Line

Retirement can mean uncertainty if you haven’t taken steps to plan for it appropriately. So if you’re retired or nearing retirement, it’s essential to keep your goals—and your plan to achieve them—firmly in sight.

Securities offered through LPL Financial, member FINRA / SIPC. Advisory services offered through IFG Advisory LLC, a Registered Investment Advisor (RIA). IFG Advisory LLC and Strong, Gaddy, Lee Wealth Management Group are separate entities from LPL Financial. 1-05231961

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