Retirement readiness about more than money

Sue called me in May to see if I could help her and Kyle, her husband, with their retirement plans. In a panic, Sue told me that Kyle was planning to retire in June and exclaimed, “I can’t believe he’s really going to do it!”

I met with Sue and Kyle later that week and, after talking with them for a few minutes, it was obvious that Kyle was looking forward to retirement almost as much as Sue was dreading it. To his credit, Kyle agreed to postpone his retirement date until September to give the couple more time to get ready for it.

Sue and Kyle’s situation is extreme, but their dilemma is shared by plenty of people. While most of us want to retire some day, many people are not ready for the next phase of their life when the time comes. There are at least five aspects to retirement to consider: financial, emotional, social, activity and location. The happiest retirees are the people who create a plan for retirement that touches on all five aspects, not just the financial issues.

Here are five things you can do to be “retirement ready,” even if retirement starts this year.

1. Talk with your spouse or partner to share ideas. As Sue and Kyle demonstrated, one person might see retirement as a great idea, and the other partner might be afraid of it. Start by talking about where you’ll live and how you’ll spend your time in retirement. That gives you an idea of your lifestyle and how much income you’ll need. It also uncovers any fears for both of you. In Sue’s case, she wasn’t sure they would have enough money to live on and allow her to do the things that made for a good quality of life. Ironically, Kyle had the same fears. They had never talked about their concerns, so neither realized what the other was going through.

2. Finances are important, so figure out how much income you can expect from all sources. Compare how much income you’ll have and the amount you’ll need to support the retirement lifestyle you want. If there isn’t enough income, you’ll need to adjust either the amount you’re saving, when you’ll retire or the amount you’ll spend in retirement. In Sue and Kyle’s case, he had a traditional pension from his employer, but he wasn’t sure what form of payment to take. The couple decided that a pension payment that left Sue with two-thirds of the income that Kyle received should he die would be adequate.

3. If you’re at least five years before your target retirement date, test your retirement plan by taking a vacation where you think you want to retire and spend at least two weeks living the lifestyle you want, including living on as much income as you think you’ll have. If retirement is within a year, at least try out the retirement life by spending a couple of weeks at or near your retirement location without contacting anyone at work. One of the biggest adjustments for people who retire is that their circle of friends changes.

4. Plan for the transition. If you’re within a year of retirement, the transition should start right away by reviewing your Social Security statement, figuring out what you’re going to do with your 401(k) plan and other retirement accounts when you retire, and even talking with your employer. If you are at least age 62 and want to start taking Social Security payments right after you retire, call Social Security (800-772-1213) for an estimate of your monthly check. Apply for Social Security benefits either online or by phone three months before you expect to start receiving them.

5. Medicare doesn’t start until you are age 65, so you may need a private policy until Medicare starts. Even with Medicare, many health-care costs are not covered, so you may want a Medi-Gap policy. Take stock of your likely health-care coverage when you retire and investigate your options soon. Sign up for Medicare three months before you turn 65. Medicare does not cover most maintenance care such as nursing home costs, so many people consider buying long-term care insurance. The AARP offers a long-term care policy, and its Web site (www.aarp.org) is a good place to start investigating both health-care and long-term care insurance ideas.

Retirement should be fun. A retirement readiness plan reduces fear and anxiety of the unknown so you can focus on the good things in retirement.

Steve Juetten, CFP, is an independent, fee-only personal financial planner in Bellevue. He can be reached at 425-373-9393 or by sending e-mail to steve@finpath.com.