There can be a lot to get your head around when it comes to retirement planning: asset allocation, risk tolerance, real rates of return, target date funds — not to mention Social Security and Medicare. Sometimes, it can make you feel like you need a Ph.D. in economics just to make a retirement investment decision — or at least a helpful and knowledgeable financial professional
But there’s one area where even the best advisor can’t step in — and that’s knowing the ideal retirement for you. Only you know what that dream is. And this is really where the retirement planning process needs to begin, because the more specific you get, the better chance your plan has to achieve your retirement goals.
Besides … isn’t dreaming the dream the fun part? So, grab a pen and paper (or your laptop) and start by answering these basic questions:
When do I want to retire? This is a big one. You may think that everyone wants to retire yesterday. While it’s true that some people want to end the daily grind as soon as possible, others may want to work longer because they still enjoy what they do or who they do it with. And for others, the ideal situation might be to downshift into part-time work for a few years before fully retiring — or taking a different job that pays less doing something that’s really fun. Think about what that perfect timeline looks like for you rather than treating your 65th birthday as an arbitrary deadline.
Where will I want to live? Perhaps you plan on staying in your current home or relocating to be closer to your children and grandchildren. Maybe you want to sell your house and buy a condo on the beach — or downsize to save money in exchange for an earlier retirement. If you’re really adventurous, your ideal destination might even be outside the U.S. entirely.
How much do I want to travel? Many retirees look forward to traveling more once they’re no longer clocking in. Consider to what extent travel factors into your retirement dream. Do you want to cruise around the world? Buy an RV and hit the road for months at a time? Or travel to Europe every spring? Also, consider your travel tastes. Are you the type who aspires to stay in four-star resorts lounging in your own personal pool cabana — or are you more of a roadside motel and grab-a-burger type?
What hobbies do I plan to enjoy? Some activities may not cost much at all. If you enjoy tending your garden and watching the birds and butterflies visit, that’s going to cost you a lot less than a passion for dressage. There will be a lot of time to fill during retirement, so think carefully about how you’ll want to spend it.
What about eating out? Do you look forward to frequent fine dining during your golden years — five-course, white-tablecloth meals complete with a good bottle of cabernet? Eating out frequently, especially at nice restaurants, costs a lot, so it’s important to know how this expense factors into your retirement.
Visualize All the Details
Once you get all the specifics laid out, create a binder (or a computer file) with photos and descriptions of all the elements of your ideal retirement. Many self-help experts recommend visualizing goals to improve your chance of achieving them. Add to your retirement “dream book” whenever you feel inspired.
Of course, there are many other retirement expenses to consider that aren’t quite as fun to think about, such as medical costs. But, starting your plan with a clear picture of your retirement dream will not only help you set more accurate and realistic goals, but it can also help keep you motivated to stay the course when it comes to your saving and investing objectives along the way.