Four Things to Do Before You Retire

Vanguard lists four things to do before you retire as follows:

1. Consider a career change. "Downshifting" to a less time-consuming (and more fulfilling) job may be worth considering, especially if you expect to stay healthy and active well beyond age 65.

2. Make saving your top priority. You've spent a lifetime working and saving in order to enjoy retirement. So make sure it stays at the top of your priority list.

3. Understand your health care and insurance options. Health care may be your single greatest expense in retirement. On a related note, this may be a good time to reconsider your need for life insurance, particularly if you no longer have dependents. Unless you're interested in covering estate taxes on behalf of your heirs, it may be unnecessary.

4. Get out of debt. No one likes being saddled with debt, particularly during retirement.

My thoughts on these:

1. I think the definition of retirement is changing. I believe that most people will go from full-time work at their current career to less-demanding work in another field -- and work until they can't work any longer. The time of saving forever and retiring at 65 with no job is passing many people by. One of the key reasons for this is that many people are unwilling to make the spending sacrifices now in order to have a work-free retirement.

2. You should plan to spend less than you could spend while in retirement to give yourself a savings cushion. In other words, if you can make it on withdrawing only 3% of your retirement savings per year, you'll be much better off than those who need to take out 4% or 5%.

3. Yep, health care is a HUGE retirement issue. It's one of five things that could derail your entire retirement plan.

4. Another reason to be out of debt (completely). I'm sure someone will disagree, but I don't see any benefits to having debt (including a mortgage) when you reach retirement.

Comments

"The time of saving forever and retiring at 65 with no job is passing many people by. One of the key reasons for this is that many people are unwilling to make the spending sacrifices now in order to have a work-free retirement."

I think another reason is that people spend so much time at work their whole lives that they don't have any outside interests and don't know what to do with themselves once they retire even if they could afford to not work. That's kind of depressing. I think you need a balance of working hard to save enough money to retire, but allow some time for outside interests so you have something to do once you get there.

[Param Iyer]

FMF,
I have a question on #2 - where you suggest withdrawal rate of 3%. I'm targetting 1%, perhaps that is too conservative. My thought is that money market funds can deliver about 1-1.5% more than inflation rate. Even if taxes & inflation are accounted for, this approach would allow me to draw the same amount adjusted for inflation till eternity, and leave the same inheritance in real terms. Am I delaying my retirement to eternity???
Regards, Param

[poor boomer]

Some unidentified source said:

"The time of saving forever and retiring at 65 with no job is passing many people by. One of the key reasons for this is that many people are unwilling to make the spending sacrifices now in order to have a work-free retirement."

Okay, I'll stipulate guilt. Rent, medical expenses, plus a student loan payment take 87 percent of my income. What spending sacrifices whould I make now?

[FMF]

Param --

Maybe, maybe not. Depends how much you can sock away now and how much you can live on in retirement.

Poor --

Only one way to create more savings -- increase the gap btween what you make and what you spend. Two ways to do that: make more or spend less.