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It's important to celebrate the transition to retirement. This shift signals the opportunity to pursue life on your terms — free of commitments to a full-time work schedule and the stress that often comes with it.
Retirement marks the start of an exciting new journey, but it may also require that you let go of some of the habits, beliefs and identities that have influenced your life choices up to this point. If you're entering retirement soon, these five questions could help you prepare for the next phase of your life — and the financial, professional and personal changes that may be right around the corner.
1. Will You Make a New Budget?
It's likely your retirement plan has ensured you're prepared to fund your living expenses once you no longer receive a steady paycheck. However, your monthly budget may change based on your new retirement lifestyle.
Your monthly transportation expenses may decrease once you eliminate a daily commute, for example, but the cost of health care benefits through Medicare may be higher than the premiums you paid for a workplace-sponsored plan. Also, having more time to travel or pursue hobbies may increase entertainment-related expenses.
Consider developing a new monthly budget for retirement to plan how much of your retirement income you'll need to access and when.
2. Do You Have New Financial Goals?
Retirement is a financial goal many Americans prioritize for most of their working lives. The transition to retirement indicates you've conquered a major financial goal — but now could be the time to set new ones.
A common (and essential) post-retirement goal may include how to make the most of your retirement income, and appropriately balance the risk and potential returns of your investment portfolio. However, it could be equally important to set financial goals that motivate and excite you.
Whether your dream is to live entirely debt-free, to gift a significant amount of your wealth to a beloved charity or to help pay for your grandchildren's college education, the financial goals you set in retirement are just as important as goals you set when you were younger. You could continue to use smart financial planning to enhance your life based on your values and ideals.
3. When Will You Claim Social Security?
A lack of patience has a price. How? When it comes to the right time to claim Social Security, it could pay to wait. Depending on age, wage earners who claim Social Security benefits early, at age 62, receive only 75 percent of their benefit amount. If you wait until your full retirement age, you will receive 100 percent of your benefit amount — and delaying benefits after your full retirement age will increase your benefit amount.
Your monthly budget could help you determine when you want to tap Social Security benefits. It may help to also consider the total size of your financial cushion, projected expenses and other financial goals.
4. How Will You Spend Your Time?
The transition to retirement may mark the beginning of a new professional journey you've dreamed about your whole life — or it may usher in a new era of relaxation, travel and self-care. Retirement may be the first time in several decades that you have complete control over how you spend your time. This newfound freedom is exciting, but it could also mean a significant shift away from the cadence of your life before retirement.
Make a list of the things you want to do in retirement, including things you've always wanted to try. This list could help you identify how to structure your time in retirement and establish a new routine — one that's fulfilling and allows you the freedom to invest time in hobbies, social events and other goals you want to conquer in retirement.
5. Who Will You Be?
Are your professional accomplishments a source of pride? Or have you been counting the days to retirement since you began your career? Either way, your identity may be more intertwined with your past work life than you realize. Your transition to retirement is an opportunity to form a new identity that has nothing to do with your professional life up to this point.
The Bottom Line
Think about the parts of your identity you want to continue to claim and cultivate, and what you'll strive toward in retirement. Whether that means ditching the title of CEO for world traveler or trading in your identity as an executive assistant for the title of entrepreneur, the transition to retirement is an opportunity to redefine your perspective, as well as the identity and energy you put into the world.
