Pick a date!

You can’t predict the future, but you need to start somewhere. Retiring at 65 is no longer the default. Your target age should stem from your values, so revisit or define them.

Ten years out

This is a time to get a reality check on your financial life and start to envision what retirement will be like.

• Time to take a basic retirement planning class. Look to your local community college, retirement system pension planners, or professional organizations. You’re not trying to become an expert or nail down your plan. But you are trying to figure out what you need to know and what you need to think about.
• How much money have you saved in a 401(k), 403(b) or other retirement account?  Do you need to save more?  Will you need to work longer?  Do you need to adjust your allocations to make them more aggressive or (more likely) conservative
• Will you get a pension? When will you reach the vesting requirements?  How much will you receive? How will it be paid out? In a lump sum, monthly, etc.?)
• Do you have a copy of your Social Security statement? How much can you expect to receive?
• What other assets and investments can contribute to your retirement? Are there any potential drains on your income?
• Start having conversations with your close friends and family members about your vision for your “retirement.”  How do you want to spend your time?  What skills might you want to keep using in part-time or volunteer work?

 Five years out

• Revisit the questions from 10 years out.
• This is a good time to start a journal. Take some of those daydreams you put away and make them more specific. For example, rather than “spend time with grandkids,” you might write “spend two dinners a week with grandchildren.”

 Two years out (or less)

Time to get serious.

1. Make sure your partner/spouse is involved, if you have one and they aren’t already. Communicate and negotiate with them about how you expect to spend your days and money.
2. Hire a financial planner if you haven’t already done so. You want a fiduciary. The Financial Planning Association is a great place to find one.
3. Create a realistic budget. Figure out if you’ll need to work for income or where you may need to cut back on expenses.
4. Figure out when you’ll take Social Security, whether and when you will sign up for Medicare, etc.
5. Turn that “stake in the ground” into a real retirement date. Put a date in the calendar to retire, whether you share this with your employer or not.
6. Get more specific about how you’ll spend your newly found time.

 I often say it’s not about the plan, it’s about planNING. Life happens. Mid-flight corrections are necessary, and you can’t schedule those.  But following this schedule will help minimize the changes and the surprises.

Take the pressure off!

You do not have to have all of the answers now, so start by separating the financial part from the how-to-pass-the-time part. I often tell clients who are “stuck” on how to begin planning for retirement to focus on the first three years and then on the last three years. This takes the stress out of a big question like, “What the heck am I going to do for 20-30 years?!”

For the first three years, write down the collection of projects you want to get done. This often leads to a very satisfying feeling of purpose and direction. It’s like you’re still working, but you’re working on the stuff you want to work on and have been putting off. I’ve had clients travel for a year, remodel homes and take care of grandchildren, to name a few.

Then write down your ideal last three years, which are also usually easy to envision. These are typically slower, easier, quieter. This part also comes with specifics, such as:

• where you’ll live,
• who you’ll rely on for companionship and support,
• how you’ll want to manage your physical slow-down,
• how you want to be cared for and who will take care of you, and
• how you’ll feel at the end of each day

This process helps you figure out how much money or assets you need to set aside to meet these criteria, which will help build the financial part of your retirement plan.

Now for the years in between. I recommend making a list of the skills you want to keep using. This will likely have far fewer specifics than the first or last three years. That’s fine. For instance,

• I’ve had teachers that want to continuing teaching, so they consider tutoring.
• Those leaving executive positions find there are all kinds of nonprofit boards looking for expertise in leadership, development and managing a budget without having to manage employees.
• Some people enjoy mentoring others and find places to create those relationships.
• Talk to others who have retired. Keep your networks going with people who are or are not in the workforce. You don’t need to know exactly what you want to do, but it’s helpful to identify those skills of which you are most proud, most willing to “give away,” and most likely to energize and satisfy you.

In my experience, most people take two to three years to settle into a “retirement groove.” They tackle all of their projects early on, then they hit the end of that list and it takes a while to figure out how to spend their days. Even those who have done a “whole lotta nothin’” in the first year of retirement realize they want to make a change in how they spend their time. This is typical and normal. I also find it takes two to three years for the budget to work itself out. Rest assured, both how to spend time and how to spend money do work out. And both begin with figuring out how to spend the first three years and how to spend the last three years.

What to eliminate from 31 ideas and what to add

There’s an older article that refers to 31 ideas. I see no reason to replicate it.  Check it out.  There are some great suggestions.

 
Here’s what I would not do (or at least be wary of):

• Make an extra mortgage payment.  This is only worthwhile if you’ve sat down with your financial planner and decided this is actually in your best interests.  It likely isn’t.

• Increase your student loan payment.  Again, only worthwhile if you’ve considered the interest rate, whether you can deduct the interest, and whether it makes sense in your overall financial plan.  Remember, paying off debts is not the same as accumulating assets.

• Seeking a lower interest credit card.  Initiating new credit can bring down your credit score, so if you’re planning to buy a house, this could be a bad idea.  Otherwise, it’s a great idea.

• Be careful about shopping for new home and auto policies.  Make sure that you’re not losing “seniority” at your insurer that you would be giving up should you change companies.

 
Here’s what I applaud and highly recommend:

• Set an automated payment toward your debt.  In this, I’m thinking about the minimum monthly payments.  Make sure those are paid automatically.  Now, you might always pay more or pay them off, but I can’t tell you how many clients thought they were paying ABC Bank for their mortgage but sent the payment to the credit card division and didn’t catch the mistake until they were 30 days late.  Yikes.

• Check your credit report.

• Reread your estate planning documents. Make sure you still agree with them.

• Walk a loved one through your affairs. 

 
Here’s what I would add:

• Call your mortgage broker and see if you can do better on your residential loans.

• See the comment near “Investments and Retirement” about checking out your medical report file from the nationwide consumer reporting agencies.  Like checking your credit report, you may discover mistakes that are causing you money.

• Consider buying long-term care insurance.

 
If we can help you with any of these items or with a referral, please call.

You must make your own path

Start here:  It’s not your fault.  Your parents probably had their retirements built this way:

     • By the government (Social Security)
     • By their employer(s) (a pension)
     • By their savings (what they saved)

But your retirement probably looks more like this:

     • Your savings (maybe a 401k plan)
     • Your savings
     • Your savings

Not only is this a daunting proposition, but the people who probably help you with advice about many things (your parents) are often unable to help you at all in retirement planning because what they did won’t work for you.  As a result, this generation is a little lost.  Not your fault.  But it is your responsibility to recognize that you may need some assistance and help in learning what needs to be done, when and how.  Read.  Ask questions.  Do research.  This is your life and your money.  You can do this.

And, well, that’s what I’m here for.  I can help, too.  Let’s get started.

I’m not saying you shouldn’t have dreams and goals.  What I’m saying is that the chances that you’ll success in achieving those dreams and goals will increase if you don’t take action in January.  Set whatever wishes, goals, and dreams you want for 2011.  Write them down. Put them in a box somewhere where you’ll see it no sooner than February 2nd.  Then, go back to your long winter’s nap.  In February or March, open these notes up, and start sowing the seeds that will make those dreams come true this year.  In the Northern Hemisphere, in this time of the year, it is hard to grow anything.  It’s dark. It’s cold.  We just crossed over the longest night of the year (winter solstice, December 21st).

All things grow better in light and warmth.  Your resolutions do, too.  And it takes the pressure off during a season when you don’t need more.  Enjoy the nap.

1. Call your accountant if you have not already for end-of-the-year tax planning.  The possible Bush tax cuts extension is making a mess of everyone’s planning. Come join in the fun.
    
2. If you’re going to convert your IRA to a Roth IRA this year so that you can pay the taxes over two years, you need to do that now.
    
3. Get your payroll service in order.  If you have not been happy with your payroll service or are hiring someone for the first time, you need a solid payroll company.  January is the best time of the year to make a change.
    
4. Get your business planning done.  Record your accomplishments.  Let go of your “failures.”
    
5. No New Year’s Resolutions.  Remember, they don’t work in January.  Wait until at least February 2^nd.  The gym will be emptier by then anyway.

It’s the home stretch of 2010.  Enjoy!

Getting ahead of falling behind

This time of year I spend on business planning.  What worked this year and what didn’t?  What was missing?  Where will I spend my time next year?  Where will I make my money?  What projects do I want to take on?  What excites me about 2011?

This starts with sitting on the floor and taking out every file in my file cabinet and cleaning it out.  If I haven’t looked at it and don’t need it, it gets tossed.  If should be scanned and filed, it is.  The most useful items are put at my fingertips.  I go through my electronic files and make a file that says “2010” and I will put all 2010 documents there.  That folder will live in a folder called “Historical”.  If I really need it, I can find it.  (I rarely need it.  It’s just too easy to save electronic stuff.)  I put on music, sing, and purge.  I love making room for the new.

I’m often asked how I manage to do so much with so much clarity, confidence and focus.  Where do I get the time?  How do I remember it all?   This annual ritual of coming casual to the office, sitting on the floor, and sitting quietly through my thoughts is what makes that happen.  I know where I’m going to spend my time, I know what has priority for me, I know where my information lives.  When a request or a question comes across my desk, I know how to think about it, I know whether to say yes or no, I know where to go to get the answer.  It’s not so much about orderliness as it is about efficiencies.  I want room in my life to do what I want.  (Searching for things isn’t one of them.  However it is snowing, and I’m ready to ski.)

If you’re lucky enough to be in a business that’s quiet during the holidays, take the quiet time to clean out the old and make room for the new.  I wish you great productivity, insight, creativity, and excitement for a new year coming.