Financial Focus: Nearing retirement? What questions should you ask?
The recent market volatility has affected just about everybody’s financial and investment situations — so, if you were planning to retire soon, will it still be possible?
Of course, the answer depends somewhat on your employment situation. With so many people’s jobs being affected by the coronavirus pandemic, your retirement plans may also have been thrown into confusion. But assuming your employment is still stable, what adjustments in your financial and investment strategies might you need to make for your retirement?
Here are a few areas to consider, and some questions to ask yourself:
Now is a good time to review your retirement goals and assess your progress toward achieving them. You may want to work with a financial professional to determine if the current environment has materially affected your goals or if you need to make modest adjustments to stay on track.
You probably created your investment strategy with a particular type of retirement lifestyle in mind. Perhaps you had planned to become a world traveler when your working days were over. Of course, in the near term, extensive travel may not be possible, anyway, but once we move past the pandemic, your freedom to roam will likely return. But if your investment portfolio is not where you thought it might be, can you (or do you want to) adapt your lifestyle plans? And can you accept the same flexibility with your other lifestyle goals, such as purchasing a vacation home, pursuing hobbies, and so on?
Based on your retirement goals and your willingness to adjust your retirement lifestyle, you’ll want to consider your options and tradeoffs. For example, would you be willing to work more years than you had originally planned in exchange for greater confidence in your ability to enjoy a comfortable retirement lifestyle? By working longer, you can continue adding to your IRA and 401(k) or similar retirement plan, and you may be able to push back the date you start receiving Social Security to receive bigger monthly benefits. You might also review your budget for opportunities to reduce spending today and potentially save more toward your retirement goals.
You can file for Social Security benefits as early as 62, but you can get 25% to 30% more each year if you wait until your full retirement age, which is likely between 66 and 67. As you created your retirement plans, you likely also calculated when you would take Social Security, but you may need to review that choice. If you postpone retirement a few years, what effect will that have on when you choose to take Social Security and, consequently, the size of your benefits? You won’t want to make a hasty decision, because once you start taking Social Security, you can’t undo your choice.
This is certainly a challenging time to be entering retirement, and you’ll have some questions to answer. But even in the midst of uncertainty, you still have many choices. Consider them carefully and make the decisions that work for you.