Retiring as a Small Business Owner

There are over 30 million small businesses in the United States. Many people start their own businesses in order to become their own boss and take control over their schedules, career goals and finances. It can be incredibly rewarding to start and own a successful small business. But one thing that many small business owners may not think about is a retirement plan. 

As a business owner, you may assume that family members will take the reins in exchange for a share of future revenue. Or you may bank on selling your business when you’re ready to retire. It may be unwise, however, to put all of your proverbial eggs in one basket—and you shouldn’t wait until you’re close to retirement age to think about your financial plans. Here are some ways to prepare early for your retirement as a small business owner. 

Evaluate Your Retirement Needs 

First and foremost, you should think about the income that you’ll need to live comfortably during your retirement. A financial professional can help you calculate this, but there are also multiple free online tools that you can use. Getting an idea of what your living expenses may look like when you’re no longer generating business-related income—or unable to have your business pick up the tab—will show you a realistic picture of what your savings goals should be. 

Use your current age and your desired retirement age to estimate what percentage of your income you may need to save now in order to have a comfortable retirement later. Many small business owners invest funds back into their business to promote growth, but you should consider saving at least a small percentage of your revenue as a backup plan. Having a solid retirement nest egg in place means you’ll be financially secure in case of an unplanned early retirement or health issue. 

Open a Diversified Retirement Savings Plan 

Paying into a 401(k) or IRA as a small business owner can benefit you financially now and in the future. Saving money in a retirement account allows you to lower your tax bill according to how much you contribute. Those funds can grow tax-deferred until you start to make withdrawals during your retirement. 

There are a few different options for retirement plans for small business owners. If you’re the sole employee of your business, you can choose a SEP-IRA or Solo 401(k), both of which offer tax-deductible savings. For small businesses with less than 100 employees, a SIMPLE IRA or 401(k) allows you and your employees to make pre-tax contributions to your plans. 

When thinking about investments, you should focus on simple funds. Consider investing in a mix of low-cost index funds. Better yet, invest in a target-date fund that adjusts your investment balances depending on the year you expect to retire and your current age. This is an easy way to reach your retirement savings goals. 

Increase the Value of Your Business  

While saving up for retirement is the safest option for a small business owner, you may also want to make sure that your business is viable even if you leave. If your business can’t run without you, it’s unlikely that it will have a very high value if you decide to sell and it may be hard to keep afloat if you pass it down to a family member. Instead of spending all of your time working within your business, you should focus time working on your business to make sure that it can run smoothly without you. If your business model doesn’t allow the business to run without you, there’s even more reason to make sure you have a solid retirement plan in place. 

Profit First 

Profit First is designed to allow business owners to approach finances in their business in a new way. Typically business owners operate from a position of paying expenses and then living off the leftover. Profit First takes into account designing your lifestyle while investing in your business. Call us for professional help in implementing a Profit First approach based on the book Profit First by Mike Michalowicz.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Wellness in Retirement

It is possible to plan your retirement to accommodate total financial freedom. However, wealth alone does not determine how much you will enjoy retirement. It’s a combination of health and wealth that will help you get the most out of your independence and freedom in retirement. Here are a few ways you can work to maintain or improve your overall wellness as you enjoy this time of financial independence.

What is wellness?

According to the Global Wellness Day organization, wellness is “a good or satisfactory condition of existence; a state characterized by health, happiness, and prosperity.”1 The idea of wellness is rooted in more than physical health, as it is meant to encompass every aspect of your quality of life- mental health, social well-being and physical state. Developing a retirement plan can help to make sure your financial wellness is covered, but you need a plan for the other aspects of your wellness.

Wellness in Retirement

The biggest areas of wellness can be broken down into three categories: mental health, social well-being and your physical state. Below are the reasons why each area of wellness is important in retirement and what you can do to maintain or improve on them.

Mental Wellness

The temptation to turn your brain off during retirement can be a big one. Considering you’ve spent decades problem solving for 40+ hours a week, the idea of relaxing in front of the television or along a sandy shoreline can be extra appealing. But in order to stay mentally well and ward off cognitive decline, it’s important to incorporate activities that keep you sharp into daily retirement routine. Keeping an active mind in retirement can help you to enjoy your retirement for longer.

One way of keeping your mental health in check could be taking on a new job in retirement, even just as a part-time position. According to the American Psychological Association, a 2009 study revealed that those who were working in retirement had levels of well-being in both health and overall satisfaction that were on par with those who were younger and not yet retired. Beyond satisfaction, working in retirement has proved in some cases to effectively ward off cognitive decline and diseases. A study of nearly half a million retiree-aged participants showed that for every additional year worked, the risk of dementia was reduced by 3.2 percent. 2

Other activities to help your mind stay sharp in retirement could include:

  • Learning to play an instrument
  • Learning a new language
  • Journaling
  • Reading books
  • Doing puzzles & playing games
  • Spending time with your social group

Social Wellness

Isolation and loneliness are growing issues in Americans, especially in older adults. Leaving a job means leaving coworkers and a routine you see everyday, and if you choose to move to a retirement destination, you may be leaving all other neighbors, community friends and even family behind.

Isolation can leave you feeling completely detached from your friends and family, both physically and psychologically. It’s something more than 8 million adults over the age of 50 experience, and prolonged isolation can have the same impact on your health as smoking 15 cigarettes a day. 3

The good news is, there are plenty of ways to find social fulfillment in retirement, they just require some effort and initiative. These could include:

  • Volunteering
  • Taking or teaching classes
  • Pursuing a hobby or passion that takes you outside of the home
  • Focusing on physical wellness

Physical Wellness

You’ve heard the phrase “use it or lose it”, and this saying definitely rings true when it comes to maintaining your physical wellness in retirement. And just like your mental health, you may be tempted to enter a state of permanent relaxation in retirement. However, it’s important to take care of yourself physically. Doing so can help prevent both physical and cognitive decline, both of which can dramatically reduce your overall well-being. Some ways to stay physically well in retirement include:

  • Joining an exercise class
  • Gardening and maintaining your yard
  • Adopting a dog
  • Enjoying walks around your neighborhood
  • Creating (and sticking to) an exercise routine

With special focus on maintaining your overall wellness, your retirement may account for some of the greatest years of your life. And while you can work with a professional to ensure your financial well-being is cared for, it’s up to you to make sure the rest is following suit as you head toward retirement.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Retiring Abroad

If you dream of living abroad, retirement may be the best time. Over half a million Americans living outside the US receive some Social Security, and that number is expected to grow. Many retirees cite cost of living as their reason for moving, while others say health care costs contribute to their move away from the U.S.

Try Renting First (or Forever)

It’s a good idea to spend some time in the area you’d like to live in to see if it suits you. Renting for a few months will expose you to the good and the bad the country has to offer and gives you the flexibility to move locations if the first one doesn’t feel right.

Don’t be too attached to the idea of eventually owning, either. While homeownership is part of the American dream for many, chances are you may not be able to purchase property in your new country. Depending on where you move to, there may not be a distinct benefit to owning over renting, and you may find that you enjoy the freedom of traveling at your leisure.

Do Your Research

It’s important to understand the residency requirements for the country of your choice. Take some time to research these requirements, like minimum income requirements, to ensure that you qualify before retirement and moving.

Once you’ve committed, be sure to brush up on current international banking regulations. You may want to consider holding on to your current state-side bank, but note that some banks frown on maintaining an account if you don’t have a U.S. address. If you choose to open a bank account in your new country of residence, you’ll likely have to file an annual report with the U.S. Treasury Department.

Be Realistic

Your move may mean forgoing some of the conveniences you’ve grown accustomed to in the U.S. Think cheap gasoline, convenience stores on every corner, a large house and yard, and central air conditioning. If you’re moving to an area where these luxuries are a rare commodity, be sure you can and want to live without them before taking the plunge.

While not for everyone, retiring outside the U.S. can be exciting and rewarding. If you’d like to build a retirement abroad into your current retirement savings plan, give us a call.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Preparing for an Early or Unexpected Retirement

More Americans are retiring earlier than you might think

Planning for retirement is without a doubt a long-term project that takes years of saving and adjusting to prepare for successfully. It certainly isn’t a fix it and forget it endeavor. But no matter how well you prepare or how diligently you save, the reality is that health issues, company downsizing, a worldwide pandemic, or simply personal preference may put you face to face with an early or unexpected retirement. 

How common is retiring early? Perhaps more common than you might think. According to a new study by Allianz Life, more than half of Americans retire earlier than expected and for reasons outside their control. What’s even more interesting about this data is that it was collected before the spread of the COVID-19 virus when major businesses and companies facing economic struggle began offering voluntary buyouts and early retirement packages to their employees. This may suggest, then, that individuals around the world could be retiring sooner than planned. 

So how can you prepare for an unexpected retirement? Of course, you’ll always want to consult with your financial professional before making any life-altering decisions, but here are some items to consider should you find yourself in this position.

1.  Plan Your Exit Strategy

Leaving the workforce is a process that involves far more than packing up your desk on your final day and heading for the door. Besides your steady paycheck, you’ll be leaving behind other employer-related benefits such as health insurance coverage and retirement account matches. In order to receive all your benefits, especially in a profit-sharing situation, for example, you’ll need to time your exit strategy with care. Do you have paid leave you can cash out? If so, when are you eligible to do so? Take advantage of all your benefits before leaving. After all, you earned them.

2. Consider the Tax Implications of Retirement Plan Offerings

The structure and value of retirement plan options can vary greatly from employer to employer. If you are choosing to retire voluntarily, that is you aren’t being offered a buyout or early retirement plan option, you’ll likely be able to choose between taking a lump sum up front or phasing out your retirement benefits over time. Of course, you’ll need to decide which option best aligns with your other retirement income sources and how the tax treatment will affect your after-tax, take-home amount. For example, if you expect to have a higher income down the road, you may choose the lump sum option now rather than later when the extra income could bump you into a higher tax bracket. In reverse, if you anticipate having a lower income later, you may decide phasing your benefits out is a better option.

3. Align with Your Spouse 

Your ability to manage your income and mitigate your tax burdens can largely determine the longevity of your retirement savings. Therefore, if you are married and pool your income with your spouse, you’ll want to align your retirement plan options with theirs. Planning together will give you the highest probability of success for maximizing your long-term income, making the most of your social security benefits, and managing taxes over time. 

4. Decide on Healthcare Coverage

You’ll want to make sure you have healthcare lined up so you don’t suffer a lapse in coverage. If you aren’t yet eligible for Medicare, you will need to decide whether it is more beneficial to purchase your own individual insurance or extend your employer coverage through COBRA. Keep in mind, COBRA coverage is only available for a limited time after you leave your job so you’ll want to make sure it bridges the time gap you need beforehand.

What We Do

Facing an early retirement may not be in your plans, but external forces outside your control could force this to become a reality. In the event you are faced with this decision, be sure to consider all the short and long-term consequences of your actions. No one wants to outlive his or her assets or become a financial burden on their family.

Before taking the leap, ask questions and discover solutions from a Retirement Management Advisor®. The RMA® designation is an advanced certification for advisors who want to mitigate clients’ risks and master the retirement planning advisory process, all within an increasingly fiduciary environment. The RMA® program teaches financial professionals to take a holistic approach to your retirement needs. Retirement Management Advisor® professionals look beyond managing investments or retirement products and take a multidisciplinary approach to develop a complete framework for your retirement plan. Only an elite few advisors hold the prestigious, advanced RMA® certification, which is delivered by the Investments & Wealth Institute®.

We have solutions for you, talk to your Retirement Management Advisor® today.

Monique Marshall, RMA®, AIF®

President & Founder, Life By Design Investment Advisory Services

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Why the 4% Rule is Only a Starting Point for Retirement

Planning for retirement has never been more important and yet so challenging. Given the difficult inflationary conditions of the past two years, the risk that worries most retirees continues to be outliving their savings. This is because, when it comes to markets and the economy, we can’t control the timing of events – including day-to-day market swings and whether investors begin retirement in a bull or bear market. What we can control, however, is our own behavior by staying disciplined. Thus, while there are never any guarantees, history shows that having a sound financial plan that can adjust to changing conditions, accompanied by proper financial guidance, is the best way to minimize retirement risks. How can retirees continue to maintain peace of mind and their quality of life in today’s environment?

Maximum withdrawal rates have varied over history

Two of the most important concepts when it comes to retirement and investment planning are “the 4% rule” and “sequence of returns risk.” In simple terms, the 4% rule attempts to answer the question “how much can I withdraw from my portfolio each year over the course of my retirement?” This concept was coined by William Bengen who observed that, historically, a 4% annual withdrawal rate from a portfolio was “safe” in that retirees were unlikely to exhaust their savings over a 30-year retirement horizon, accounting for inflation. For this reason, this is also sometimes referred to as the “SAFEMAX rate.”

How does the 4% rule hold up today? The accompanying chart shows the hypothetical “safe” withdrawal rates based on 60/40 stock/bond portfolios and inflation rates across historical 30-year periods as well as estimates for more recent years. These illustrative calculations show that only once in the 1960s did the maximum withdrawal rate fall as low as 4%. On average and with the benefit of hindsight, retirees would have been able to withdraw 6.9% each year without running out of funds. Of course, the safe withdrawal rate can vary dramatically from year to year, a fact that should not be surprising given how much market returns can change across a cycle. In general, this pattern is positive for retirees since it suggests that there is a historical basis for steady withdrawal rates of 4% or above.

However, there are several points to keep in mind. First, this depends heavily on sticking to an investment plan throughout the full period. Investors who would have overreacted to short-term market pullbacks would have failed to rebound alongside the market, negatively impacting their withdrawal rates later in retirement. This is why investing is as much about our own behavior as it is about market and economic events. Second, this analysis is oversimplified since it does not account for differences in portfolio construction and risk tolerance across individuals that are a critical part of real-life financial planning. After all, a 60/40 portfolio may be quite aggressive for many retirees, especially later in life.

The sequence of returns can dramatically impact the value of a retirement portfolio

Finally, and most importantly, simple rules of thumb should be used with caution since they may not account for the sequence of returns, or the idea that the timing of bear and bull markets can dramatically impact the value of a portfolio when withdrawals are being made. Specifically, when the market is down early in retirement, withdrawing funds amounts to “selling low.” Investors are then less able to take advantage of future bull markets and the wonders of compound interest over the remaining years. Conversely, withdrawing when the market is up (“selling high”) allows the portfolio to maintain a higher value and compound faster, which then provides a cushion when the inevitable recession and bear market hits. Unfortunately, investors don’t get to choose whether they begin with a bull or bear market – they need to adjust accordingly to the hand they are dealt.

So, the 4% rule is a helpful place to start but lacks the nuance that may be appropriate in balancing spending and risk throughout one’s retirement. Understanding the various factors that affect withdrawal rates requires financial guidance, and adjusting to changing conditions requires a financial plan that is sensitive to the needs of retirees.

Life expectancy continues to rise

What simple rules of thumb also don’t account for are increasing life expectancies. For instance, according to the Social Security Administration, 40-year-old men and women today have a life expectancy of 79 and 83, respectively, as shown in the accompanying chart. However, the 90th percentile could live well into their 90s. Similarly, men and women who are 65 years old today could live to 83 and 86, on average, while the 90th percentile could live to 94 and 97, respectively. The difference of a decade or longer, i.e. a retirement of 20 years vs 30 years, or 30 years vs 40 years, can have dramatic implications for investment portfolios and financial plans.

The prospect of living longer than expected is often referred to as “longevity risk.” This risk is asymmetric in that running out of funds is far worse for most households than leaving money behind to loved ones, charities, and more. This means that life expectancy is an important input to any financial plan. Ultimately, managing longevity risk is another reason why all individuals can benefit from professional financial advice.

The bottom line? While the 4% rule can act as a basic guide for investors in retirement, it unfortunately isn’t enough. Investors should continue to stick to long-term investment and financial plans as they navigate this challenging market and economic environment.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Maximizing Your Financial Plan: Annual Review of Employer Benefits

When it comes to building a solid financial plan, evaluating and maximizing the benefits provided by your employer should be a top priority. Many employees overlook the importance of conducting an annual review of their employer benefits package, missing out on valuable opportunities to enhance their financial well-being. In this blog post, we will explore why conducting an annual review of your employer benefits is crucial and how it can significantly contribute to your overall financial plan.

Health Insurance

Health insurance is one of the most critical components of any benefits package. Start your review by thoroughly understanding your coverage options, including premiums, deductibles, co-pays, and out-of-pocket maximums. Assess your healthcare needs and consider any changes in your circumstances, such as the addition of a family member or the need for specific medical treatments. Evaluate alternative plans to ensure you are maximizing your coverage while minimizing costs.

Retirement Plans

Your employer’s retirement plan, such as a 401(k) or pension scheme, is a powerful tool for building long-term financial security. Review your contributions and determine if you are taking full advantage of any employer matching contributions. Consider increasing your contributions, if possible, to maximize the benefits of compound interest over time. If your employer offers a Roth 401(k) option, evaluate whether it aligns with your tax and retirement strategy.

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)

FSAs and HSAs allow you to set aside pre-tax dollars for eligible healthcare expenses. Review the contribution limits, rollover options, and eligible expenses for each account. If you have an FSA, ensure that you spend down the funds before the end of the year to avoid losing them. If you have an HSA, explore investment options and consider using it as a long-term savings vehicle for healthcare expenses in retirement.

Life and Disability Insurance

Evaluate your life and disability insurance coverage to ensure it aligns with your current needs. Consider any significant life events, such as marriage, the birth of a child, or a promotion, which may warrant an increase in coverage. Review the beneficiaries listed on your policies to ensure they are up to date. If your employer provides group coverage, compare the costs and benefits against private insurance options to determine the best fit for your needs.

Employee Assistance Programs (EAPs) and Wellness Benefits

Many employers offer EAPs and wellness benefits to support employees’ mental and physical well-being. Familiarize yourself with the resources available, such as counseling services, stress management programs, gym memberships, or wellness incentives. Take advantage of these offerings to enhance your overall quality of life and potentially reduce healthcare costs in the long run.

Tuition Reimbursement and Professional Development

If your employer provides educational assistance or professional development programs, take advantage of them. Consider your long-term career goals and identify opportunities for growth and advancement within your organization. Learning new skills or pursuing further education can increase your earning potential and contribute to your financial plan in the long term.

Conducting an annual review of your employer benefits is essential for maximizing your financial plan. By taking the time to evaluate your health insurance, retirement plans, FSAs/HSAs, insurance coverage, wellness benefits, and educational assistance, you can identify opportunities to optimize your benefits and increase your overall financial security. Remember, your employer benefits package is a valuable resource that should not be overlooked when developing a comprehensive financial plan. Contact us today for assistance in reviewing your Employer Benefit opportunities.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Should You Retire at the Same Time As Your Spouse?

If you and your spouse are making plans to retire, you’re probably wondering whether it’s a good idea to retire at the same time. Many couples go through the same thought process and, in fact, one in four couples quit their jobs within a year of each other. But retirement is a decision that should be carefully thought out. Here are some things to consider when deciding whether to retire at the same time as your spouse.

Healthcare Costs

In the United States, you won’t become eligible for Medicare until age 65. If you’re planning to retire before that age, you should make sure you have a plan to pay for your medical care. If you retire early and your spouse continues to work, you could take advantage of their employer-sponsored healthcare plan.

If you both retire before age 65, you’ll need private insurance. Even if one partner is eligible for Medicare upon retirement, the other partner still has to be 65 to take advantage of Medicare benefits. So in either of these situations, it might be better for one partner to continue working until you’re both eligible for Medicare in order to cut down on living expenses.

Social Security

Another aspect of retirement to consider is the amount of your social security payments. If you delay retiring until you’re between ages 66 and 70, your payment amounts will increase. If you or your spouse wants to continue working until you reach that age range, it may make it easier to pay for living expenses. This will also depend on how much you and your spouse have contributed to retirement savings accounts.

Retirement Lifestyle

It’s important for you and your spouse to discuss the kind of lifestyle you’d like in retirement. Will you downsize to a smaller house? Will you use your free time to travel across the globe or pick up a new hobby? Do you want to continue working part-time or volunteering? What day-to-day activities will you want to do together?

All of these questions should give you a good idea of how much you’ll need to fund your ideal lifestyle. Compare this to the retirement savings you already have. If you want to retire together right now, would you have enough money saved up to cover expenses? Will you have access to medical care and social security payments? If not, it might be better for one of you to retire first while the other partner continues to work to build up savings and cover healthcare expenses.

Do You Want to Retire?

If you or your spouse are considering retiring, you should also be sure that you’re ready. If you love your job and enjoy working, you may want to keep working, even if your partner decides to retire. As long as one of you is still healthy and able to work, it will be easier to fund a comfortable lifestyle when one partner is bringing in a steady income.

It also may be difficult to start working again after you decide to retire. It’s not easy to find full-time employment at an older age, especially if you’ve been out of the workforce for a year or more.

Whether you’re considering retirement years apart or at the same time as your spouse, a financial professional can help figure out what the best plan of action is for your specific situation.

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

 

Retire to Happiness: Tips to Thrive in the Next Chapter of Life

Here’s a thought: retirement isn’t the finish line. It just means a new chapter—a paradigm shift of what life is beyond long days and meetings and bosses. Unless you own your own business, and even then, you are not your business. You’re not solely defined by the question, “What do you do?” But, it doesn’t mean you should stop defining the answer for such an inquiry in your retirement era.

A quarter of retirees actually think life in retirement is worse than it was before they retired. Don’t be one of those people! Let your golden years shine when you set out a vision of what you want life in retirement to be.

Healthy finances. 

Because you won’t be working full time in retirement, you won’t have that steady paycheck to count on for income. The state of finances plays a critical part in the decision of when to retire. In fact, in a study conducted by Robert Wood Johnson Foundation and the Harvard School of Public Health, 51% of people who say they will never fully enter into retirement, say they are inhibited from full retirement due to finances.

Having a healthy portfolio and steady finances are something you’ll want to have set-up well in advance of your retirement party to maintain and grow throughout the rest of your life. However, it’s never too late to set your finances straight by re-evaluating your portfolio, investment strategy, and monthly budget. Set up a strategy session with your trusted financial advisor and then maintain regular correspondence so there are no financial surprises that could negatively impact your life in retirement. Focus on figuring how much you can realistically spend out of monthly income given Social Security, pension, 401(k), and other accounts. Work with your advisor to determine which accounts you’ll dip into first to avoid tax penalties from drawing from too many sources.

Transition time.

In 1935, President Roosevelt signed Social Security into law which established 65 as the retirement age. This worked for the American worker at that time when people didn’t live as long; the average life expectancy for men was 58 and was 62 for women, which compares with the average life expectancy of 79.25 in 2024. This was also a time when most companies guaranteed employees pensions upon retirement. For some people going from full-time work to full-on retirement doesn’t make economic or emotional sense. Consider what and how you would want to work on if you had the chance which may mean shifting to consulting part-time or working seasonally on a golf course. Perhaps it means working on something you’re excited about like woodworking, writing children’s books, or organic farming for as long as you’re able to do so. It’s not your 9-to-5 you did for 43 years, but it’s something that can provide you with self-worth and continuous learning.

Family and friends.

According to the United States of Aging Survey, connectedness with family and friends outweighed financial-based concerns for seniors in relation to the sense of fulfillment. Your relationships are an investment that won’t offer a return financially but will be invaluable in terms of happiness, kindness, and care. Strong connectivity is the best weapon against loneliness.

Communication counts.

If you have a partner—husband, wife, lifelong roommate—include them in your planning. Clearly outline your goals, wants, needs, and wishes together to best determine how to move forward in retirement. Structuring time in retirement also applies to time spent with your significant other. You’re both going to have a lot more time around one another…and that can drive some couples bonkers. Consider a schedule where one night a week is “date night” and other nights are spent with other friends or family members.

A study by Fidelity found that 40% of couples didn’t align on the expected lifestyle they would have in retirement. This is why another important discussion should be held on where you want to live. After leaving your full-time job there may be nothing keeping you in particular place. Take each other’s retirements expectations and activities, as well as collective finances, into consideration. Maybe a move some place warmer (snowbirds!) or to a home with a smaller yard, or to a place with lots of other senior citizens, or to another (cheaper) country. 

Health habits.

In addition to strong social relationships, physical health is incredibly important in later life. “Good health” was picked as a top key to happiness in retirement by over 3,300 pre-retirees and seniors in a survey conducted by Age Wave and Merrill Lynch. While opportunity for ailment, injury, and illnesses increase the older one gets, regular exercise, sleep, and a healthy diet can mitigate chances for sickness or falls, as well as quicker recoveries.

Time management.

It’s easy to assume that you’ll have more “free time” in retirement than when you were working full-time and raising children and the like. While more free time sounds like a glorious thing to be faced with, it’s important that the idle hours are spent well. One telling study based in Taiwan found that how free time is managed—not how much free time one has–was correlated with the higher quality of life. Using free time well means organizing activities that align with your personal goals and priorities on a weekly or daily schedule.

Volunteerism.

The prevailing attitude among a growing number of pre-retirees is that they aren’t going to limit themselves by trading a life of work for a life of leisure; rather they are going to take control and trade in work that they no longer want to do, for work they will really like to do, and for many of them that “work” comes in the form of volunteerism.

“The more you lose yourself in something bigger than yourself, the more energy you will have.” -Norman Vincent Peale

Who among us doesn’t seek purpose in our lives – something that goes beyond our own material needs? Living for a higher purpose is a reason to get up in the morning, to contribute to the world in a way that derives immense satisfaction. It’s where we find our passion, and it’s the legacy we leave behind. When we have something greater that drives us, life is better, more exciting and much more gratifying.

For many retirees, volunteering offers them the first opportunity to match their knowledge, skills, values and beliefs with a worthwhile endeavor and a way to give back to the community. Whether it’s tutoring a high school student in math, training seniors in new skills, being a docent for a local museum, providing executive-level experience to charitable organizations, or offering back-office skills to a non-profit group, many of our retired clients are discovering how the “butterfly effect” of their contributions creates an expanding circle of value throughout their communities.

Retirement is a time to harvest fulfillment. It is also a time for regeneration which can only occur through a deliberately planned transition that incorporates your own needs, wants and values. For that, there are no rules; only your vision and a plan. LBDIAS can help you create a retirement plan that is fully aligned with your goals. 

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Life By Design Investment Advisory Services is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.