Retirement can be a hotly anticipated stage of life. But things are changing. With people living longer and the Baby Boomers retiring, there are important things we all might forget about retirement.

We can’t forget about how Social Security works, how much health care is going to cost and, of course, we can’t forget that saving for retirement early is one of the most important things we can do to prepare.

More of the above point will be addressed in this article to get you fully prepared for retirement.

• The top 5 Things you Forgot to Consider While Planning your Retirement
• What are the key Elements Needed in Preparing for your Retirement?
• What do I need to know before Retiring?
• What Retirees do all day?
• What month of the year Should you Retire?
• Where is the Cheapest place to Retire in the World?

The top 5 Things you Forgot to Consider While Planning your Retirement

There are many unknowns to take into account, such as your expenditures in 20-30 years and your emergency savings plan for the unexpected circumstances. You may want extra money set aside just to enjoy your life, but there may be other circumstances where you need to spend money on services like care eastern suburbs to ensure your quality of life is the best it can be. You want to have enough aside to cover every situation you may face. 

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Here is a quick list of things you may forget to consider while preparing your retirement plan.

1. Figuring out your “Retirement Corpus”

A Retirement Corpus is the amount of money you need to have set aside and saved by the end of your work life to receive an adequate pension for your retired life. To build a Retirement Corpus, the first thing you must do is figure out the number of years you have before retiring.

Whatever you choose as your investment plan, make sure you have sufficient time to grow your corpus in order to live a worry-free retirement life.

2. Accounting for Inflation

Inflation means the hiking cost of goods that happen over a period of time. It can be calculated with the Consumer Price Index (CPI), and according to records, it rises approximately 2% to 3% each year, with medical aids, prescription drugs, and general healthcare ranging between 2% to 5% each year.

There can be huge changes in your expenditures when you finally plan to retire. The smallest mistake can throw your potential plan off track.

3. Taking Taxes into Consideration

When you retire, you are taxed on most accounts…either from taxed withdrawals or from your investment activity. If you forget to consider taxes, it can lead to extreme shortfalls, so make sure that along with inflation, you contemplate and include the taxes.

This way you will receive the expected pension you saved and have enough to spend.

4. Budgeting during Retirement

It is important for you to know how much you need per month to live comfortably. This is why inflation and taxes are considered before you develop the budget.

Look at your expenditures (household bills, insurance, groceries, dinning out, fuel, etc.) while working to estimate the amount you will need in retirement. Then account for inflation and deduct taxes to determine your monthly budget.

Be sure to discuss your plan with your partner or spouse as you may have different goals and/or intentions…and realize these expenses may change over time. Having a clear vision of what you want and what you need makes a significant difference.

5. Sources of Income

Now that you have budgeting out of the way, look at the sources of income you will have. Are your heavily relying on government sources of income (CPP & Old Age Security) and family inheritances?

Have you considered possible family emergencies such as raising your grandchildren or caring for a sick family member? What if the markets crash and your Retirement Corpus has dropped 20%? Think about it….your plan should account for these unexpected life events.

What are the key Elements Needed in Preparing for your Retirement?

In retirement planning, it’s easy to go astray. That is why you need to pay attention to the following elements when you are planning your retirement.

1. Start with well-defined goals, and revisit them at least annually

The closer you get to retirement, the more often you should sit down and think about your overall retirement strategy. In Ernie Zelinski’s “How to Retire Wild, Happy and Free,” the author makes the argument that setting your retirement goals expands far beyond managing your finances.

Retirement planning should encompass all areas of your lifestyle, from where you live and where you travel to how you spend your day and what truly are your income requirements.

Cookie cutter percentages and rules of thumb serve merely as benchmarks. Successful retirement planning requires flexibility and the willingness to look at all aspects of your life.

2. Many people get great satisfaction from work

So, if you are retired, and you like to work, pick something you like to do and gain emotional satisfaction from that activity. This includes working for charitable causes, hobbies, family involvement, etc.

These “jobs” may or may not come with financial remuneration. But that’s not the point; many people derive emotional satisfaction and self-worth from working.

3. Another aspect of retirement is lifetime learning

Staying relevant in today’s technology economy requires a willingness to learn and adapt. Consider this: most medical professionals would agree that 20% to 30% of medical knowledge becomes outdated after just three years.

Keeping current on technology and medicine will certainly enhance your retirement success.

4. Budgeting is more than setting a top-line spending number based on a pre-arranged percentage

Often times, we work from the bottom up, exploring what a client actually spends, instead of what they think they spend. It is not uncommon for individuals to drastically underestimate their spending on non-essential items.

How much is your cell phone bill? Cable bill? Groceries? Starbucks?! We encourage clients to look at these as recurring payments. Not $140 a month, but $1,680 a year. Big difference, right? Getting as granular as possible is liberating when planning your retirement income.

While many planners suggest that a client will need two-thirds of their working salary to live comfortably in retirement, our experience shows that they may need anywhere from 50% to 150%. That’s a big range.

Only by taking the time to define your goals, and the expenses that accompany them, can we put an accurate “spend” and “income” figure on a retirement portfolio.

Even the best crafted budget has to be flexible. Emergencies happen. Grandkids happen. Sadly, health concerns happen. For both positive and negative circumstances, budgets can, and will, expand and contract. Build contingencies into your budget and income plan for a successful retirement.

5. Let’s consider income

Retirement income can come from many sources. Social security, pensions, retirement accounts, annuities, dividends, even earned income. As financial planners, we often hear stories from clients who “forgot” that they had earned an pension from an employer that they had left decades ago.

6. Take the time to go through your employment history and discover what benefits you may have forgotten

The impact could be meaningful from a cash-flow perspective. Inheritances can also create retirement income. Again, we often see clients receive an inheritance and immediately spend it.

We’d rather go with the gift that keeps on giving – by investing the inheritance along the same lines of a retirement asset and creating a lifetime income stream.

7. Invest for your whole life

Just as your budget is not going to be static during your retirement years, the idea that your investment portfolio should never change is obsolete as well. We live in a world of massive disruption and change.

Years ago, retirees would abide by the rule taking 100%, subtracting their age, giving them the “appropriate” allocation to the equity market (blue chips only!). Today’s world does not permit such simplicity of thought.

What do I need to know before Retiring?

A visit to a financial planner is clearly one thing workers overlook before they retire. But there are a number of other things that people tend to forget to do before retirement, and as a result, may have to suffer the consequences.

Remember to take care of these five things before you retire:

1. Complete Home Repairs and Improvements

Retiring homeowners aiming to downsize are sometimes devastated to find out they will need to spend thousands of dollars to update their home before they can put it on the market.

Many homeowners, especially those who have lived in their homes for 20 years or more, have neglected regular updates to their homes, especially kitchens and bathrooms. Northern Virginia realtor Lisa Bailey-Harper at LBH Group says homebuyers want updated bathrooms and kitchens and new appliances.

She has represented clients who had old red or green carpet, mismatched appliances and decades-old kitchen countertops. “A basic thing people don’t do is paint,” Bailey-Harper says. “Paint goes a long way. You walk around and you don’t think it’s a major thing until you move something. They are living there and they don’t think about upgrading.”

2. Create a Realistic Budget

You don’t want to draw too much money in your early years and run out of money. “Most retirees will be on a fixed income, so it is crucial that a budget is created based on income and realistic expenses,” says Nasser Zaermohammadi, national training and development director at Vantis Life.

“This includes a review of a pension if they have one and Social Security statements to see how much guaranteed income you will be receiving from these sources.” Pre-retirees should also assess the value of investments and retirement accounts.

“Adjust them for inflation, if necessary, and agree on using an appropriate withdrawal rate – 4 percent is a generally accepted target – from these sources to meet your needs,” Zaermohammadi says.

3. Pay Off Debt

Eliminating debt payments gives you more money to spend on retirement expenses. “If possible, pay off all your debts and do not create new ones,” Zaermohammadi says. “An exception to this rule is for people who may want to create certain deductions in retirement to lower their effective tax rates.

Keep in mind that most people will be on a fixed income and may not be able to continue paying high interest rates associated with some of these debts.”

4. Consider How You Will Spend Your Time

Think about what you will do in the days and weeks after you leave your job. “You should start thinking about your post-career before you get to retirement age,” Edmondson says. “It would be good if you are able to develop skill sets in later years before you retire.”

You could generate additional income in retirement, which would mean less need to spend down your retirement savings. “The benefit of working longer or getting supplemental income means there’s less pressure to pull assets,” Edmondson says. “If you extend your working years, you may get additional Social Security income.”

5. Evaluate Your Health Care and Insurance Needs

Take care to sign up for a new health insurance plan before you leave behind your employer health insurance. Many people wait until age 65 to retire so they can enroll in Medicare. “Choosing the right Medicare option is extremely important,” Zaermohammadi says.

“These options, including traditional Medicare, Medicare Advantage and supplemental Medigap plans, can be numerous and confusing. Consider discussing your options with an expert who can help you navigate through these issues to make the appropriate choice.”

What Retirees do all day?

When you retire, it is nature that you will gain eight or more extra hours of leisure time each day. Retirees are generally using that extra time to linger a little longer over meals, sleep, do household chores, and watch a lot more TV, according to recently released American Time Use Survey data for 2011.

Here’s how people age 65 and older are filling their days:

Relax. As you might expect, retirees have a lot more time for leisure activities than people who are still working. People age 65 and older spend an average of just over seven hours per day on leisure and sports, compared to just over five hours among the overall population.

“These are people who have fulfilled the dream of having the complete choice of anything they want to do, and the things they choose are surprising,” says John Robinson, a sociology professor at the University of Maryland and coauthor of Time for Life: The Surprising Ways Americans Use Their Time. “The three things that retirees spend the most extra time on are reading, resting, and TV.”

Retirees spend twice as much time relaxing and thinking (0.6 hours) and reading (0.7 hours) compared to the overall population (0.3 hours for both activities). And senior citizens are equally as likely as younger people to surf the Internet for leisure and spend time socializing with friends, and only slightly less likely to exercise.

Watch TV. Americans watch an average of two hours and 45 minutes of TV per day. Retirees watch even more, averaging 4.2 hours of TV-viewing each day.

Men age 65 and older watch an hour more of TV daily (4.73 hours) than older women (3.74 hours). And people age 75 and older watch more TV than any other age group.

Sleep. The only thing seniors spend more time on than leisure activities is sleep. Retirees spend nine hours per day sleeping, compared with 8.7 hours daily among the population as a whole.

Household chores. Retirees took an average of 2.4 hours per day to tackle household chores, compared to 1.8 hours among all Americans. People age 65 and older spend slightly longer on housework, food preparation and cleanup, and lawn and garden care.

Eat and drink. The typical American spends about an hour and 15 minutes each day eating and drinking. Retirees linger slightly longer over meals, for an average of about an hour and a half each day.

Work. Not all people age 65 and older are retired. The typical senior citizen spends nearly an hour each day working. But seniors are less likely to work than the population as a whole, which spends just over 3.5 hours per day working.

“Older cohorts of individuals are less likely to be employed, so they spend less time working,” says Rachel Krantz-Kent, program manager of the American Time Use Survey.

Retirees also seldom spend any of their time persuing formal education, compared to an average of about a half hour per day among the entire adult population.

Shop. Retirees have plenty of time to research and comparison-shop for their purchases, and they spend 0.87 hours per day doing so. Americans overall spend 0.72 hours acquiring goods and services.

Volunteer. Retirees spend very little time caring for household members (0.07 of an hour) and helping people outside their household (0.2 hours).

In contrast, Americans overall spend half an hour per day caring for family members, primarily children, and about the same amount of time as retirees caring for people outside their household.

However, retirees spend slightly longer than most Americans volunteering and pursing religious and spiritual activities, doing each for an average of almost 15 minutes each day.

What month of the year Should you Retire?

The specific date on which you start your retirement could impact several different factors that affect your retirement finances. These include benefits from your former employer, Social Security distributions, and taxes to name a few.

Here are 7 factors to consider as you plan the best time of the year to start your retirement.

1. Do you have a pension?

If you work for the government or an employer that offers a defined benefit pension plan, it might be smart to retire on the day that follows the anniversary of your first day working there. This way, you’ll receive an extra year of service credit toward the calculation of your pension benefits.

2. Have you saved up any cash reserves?

Some advisors recommend saving enough money in a liquid cash account to cover the first few years of living expenses after you retire. Then you won’t have to tap into your retirement accounts if the market is down at the time when you begin your retirement.

However, if you don’t have any cash savings and will need to start withdrawing money from your retirement account as soon as you retire, you might consider retiring either very early or very late in the year.

This could allow you to avoid making retirement account withdrawals in a year when you might have earned income that would push you into a higher tax bracket.

3. Are you retiring early?

The age of 65 has long been considered the unofficial retirement age, but many people are deciding to retire sooner than this. If you plan to retire early, remember that you will be assessed a 10 percent penalty on withdrawals you make from a traditional IRA or 401k before you reach age 59½.

So if you will turn 59½ at any time during the year you plan to retire, you should wait until after your birthday to retire and begin taking distributions from these accounts in order to avoid this early withdrawal penalty.

In 2020, there are some exceptions to this due to the coronavirus stimulus, or the CARES Act. Individuals who would normally incur the IRS’ 10% penalty on early distributions are exempted for ‘coronavirus-related distributions’ of up to $100,000 of distributions in 2020.

While the 10% penalty is waived, distributions may still be considered as ordinary income. This ordinary income can be spread over 3 tax years, lowering the tax impact. Individuals also have 3 years from the date of the distribution to repay all or a portion of the distribution taken if they so choose.

4. Will you have to take required minimum distributions (RMDs)?

Beginning in January of 2020, the recently passed SECURE Act will pushed the age at which individuals are required to begin withdrawing money from their retirement accounts back from 70.5 to 72. Additionally, the bill allows working individuals to continue to contribute to their traditional IRAs past the age of 70.5.

These changes will only come into play for those that will turn 70.5 on or after January 1, 2020.

Due to the CARES Act, Required Minimum Distributions may be suspended for 2020, allowing individuals to defer taking distributions from retirement accounts if desired.

For those who’ve already taken Required Minimum Distributions in 2020, they may actually be able to return those funds to their IRA and push any further distributions into 2021.

5. Will you work on a part-time basis after you retire?

Many people today are choosing to work part-time or earn money as a freelancer or contractor after they retire. If you work part time and elect to start receiving Social Security benefits before you reach the full retirement age (FRA) for receiving Social Security benefits — which is between 66 and 67 years old, depending on when you were born — your Social Security benefits will be reduced if you earn more than $1,470 per month in 2020.

More specifically, $1 of your Social Security benefits will be withheld for every $2 you earn above this threshold. This calculation is known as the Social Security earnings test.

If you’re retiring before reaching FRA but expect to earn more than $1,470 a month in income, and you will reach FRA sometime during the year you plan to retire, you should probably wait until after your birthday to retire and claim Social Security benefits.

This will enable you to avoid the reduction in your Social Security benefits due to the earnings test.

6. Do you have accrued vacation pay?

If you have accrued a significant amount of vacation pay at your employer, find out when they will pay you this money. Since this pay will be considered earned income and thus subject to the earnings test, you might want to wait until after you’ve received the funds to retire and apply for Social Security benefits.

7. Will you turn 70 years old during the year?

By waiting until after you reach FRA to begin collecting Social Security benefits, you can increase the amount of your monthly payment when you do eventually start claiming benefits. But this is only the case up until age 70, at which time the increases stop.

So if you will celebrate your 70th birthday at any time during the year you plan to retire, you should consider retiring and filing for Social Security after your birthday. After you reach 70 years old, you won’t receive any additional benefit by waiting longer to retire and receive Social Security.

There are lots of factors that go into deciding the best time of year to retire. Talk to your financial and tax advisors for more detailed guidance in your specific situation.

Where is the Cheapest place to Retire in the World?

According to a survey by International Living, more North Americans are retiring abroad than ever. This is probably because you can have access to great housing, warmer climates, modern amenities, and remarkable healthcare systems all at a much more affordable price.

So when you’re ready to pack your bags check out our list of the cheapest places to retire in the world. There is a place for every budget!

Panama

Panama beckons retirees to come live and spend their time here. This country boasts the world’s best retirement program: the Pensionado visa. The Pensionado visa is available to anyone with a lifetime pension of $1,000 USD or more a month.

The discounts that come with the visa are amazing. For example, you can get 20% off medical services, 50% off entertainment, 25% off restaurant meals, 25% off airline tickets (perfect if you’d like to visit family back home), and 25% off electricity and phone bills. 

Panama is also known for being one of the friendliest countries towards expats. You will find that it is easy to make new friends and join different groups and activities.

This beautiful country also boasts stunning beaches, turquoise waters, fast internet, great roads, and an excellent healthcare system. With an amazing climate, no threats of hurricanes, and the ability to live a great lifestyle for under $2000 USD a month for a couple, Panama is an excellent place to retire!

Portugal

The sunny country of Portugal, a place that boasts more sunny days than anywhere else in Europe is one of the safest and cheapest places to retire in the world.

The cost of living is very reasonable and affordable and is far less than any other country in the region. For example, a couple could live on a mere $1500 USD per month to live comfortably.  

Most retirees can even keep their full pension income without getting taxed because of new legislation. There are plenty of things to do and see to keep you busy and entertained. There are plenty of golf courses, breathtaking beaches, and historic towns ready to be discovered.

You’ll also appreciate that Portugal offers a first-world healthcare system. Further, English also happens to be widely understood and spoken and whether you choose to settle in one of the coastal communities or a bustling city. It’s easy to see why Portugal would be a great place to retire.

Costa Rica

Costa Rica has one of the highest standards of living in all of Central America and is one of the most affordable places to retire abroad. Living a luxurious lifestyle here can cost as little as $1,500 USD a month.

Things like rent, food, and entertainment are significantly cheaper than what you’re used to in Canada or the USA.

Furthermore, the economy also caters to tourists and therefore offers plenty of dining options, theaters, and galleries as well as one-of-a-kind experiences you won’t get anywhere else. Trekking through the rainforests, lounging on one of their many beaches and discovering the small town’s cost next to nothing!

The stable democracy, excellent health care system, and neighborly atmosphere all contribute to making this one of the best places to retire in. Don’t forget about the warm temperatures, sunny days, and endless ocean views — you will love it!

Spain

For those looking to retire in Europe and are begging for the sunshine, Spain remains one of the most affordable places year after year. Some of the benefits of Spain include a lower cost of living, better value for property, and first-world amenities.

The incredible diversity of this country along with its warm weather, interesting history, and hospitable people make it one of the best choices to retire abroad. 

A study by International Living predicts that a couple can live for about $2,600 USD a month (this includes the price of rent) in many cities in Spain. You’ll also appreciate that Spain has an outstanding healthcare system.

Combined with the efficient public transit system, unlimited access to high-speed internet and all the comforts of home; Spain remains affordable and desirable.

Mexico

Mexico has long been an expat haven and continues to be one of the most affordable places to retire. Better yet, you won’t have to travel too far to get here. English is widely spoken, familiar stores and products are available and modern amenities are offered throughout the country.

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All of this is offered at a much lower price than you’re accustomed to in the US or Canada. Instead of spending $100 USD on groceries for the week, you will spend around $20 USD in Mexico.

Further, the healthcare system is also great but costs far less than healthcare in the U.S., and property taxes are so low you don’t even notice you are paying them.

There is still plenty of affordable property to scoop up in one of the many regions throughout the country. Whether you are looking for a beach community, a historic town, or something in the jungle, this wonderful country offers it all.

Finally

Review your investments and retirement plan regularly (annually) and talk to your financial advisor for periodic reviews to ensure you are on track with your future financial goals and objectives.