One of the most unsettling aspects of retirement is that you give up a lot of control in life. You no longer have a job with a paycheck and occasional raises and promotions, and you also lose the social network at work and maybe the responsibility for a department, project or a group of employees. Your kids are growing up, becoming independent and ignoring your best advice, and your friends may be slipping away due to illness, infirmity or perhaps they’re moving to a retirement mecca.
Suddenly you are cast out into the world alone, and you don’t know what the future holds. But you have more control over how your retirement will develop than many people think. Here are six key areas where you can take steps to improve your retirement.
1. When you leave work. Nobody knows your financial picture better than you and possibly your spouse. You know whether you enjoy your job or if your work schedule is grinding you down and making life miserable. Of course, the longer you work, the better off your finances will be, but that’s beside the point if your job is killing you. Only you can strike the right balance between the rewards and the costs of your career. Remember, it’s always possible to retire and take a less stressful job or a part-time job that supplements your retirement budget.
2. When to start receiving Social Security benefits. For most baby boomers full retirement age is 66. But you can start retirement benefits as early as age 62, or wait up until age 70 to let your benefits accumulate. The longer you wait, the more you receive in monthly benefits. If you expect to live into your 90s, then waiting makes financial sense. You will receive more money over your lifetime by waiting to claim Social Security if you live a long life. But if you need the money to cover your daily expenses, and especially if you have reason to believe your life expectancy is below average, it pays to start taking Social Security earlier.
3. When to tap into your savings. You can dip into your IRA without penalty starting at age 59 1/2. You will probably have to pay income taxes on the distribution. But you don’t have to start taking withdrawals until after age 70 1/2. You could begin taking money out of your non-retirement savings first, which lets your IRA continue to grow until you need the money later on and allows you to continue to defer paying income tax on that money. However, for some people with large IRA balances it makes sense to start withdrawals during your 60s to avoid being bumped into a higher tax bracket later on in retirement. Individual circumstances differ, so make sure you run the numbers about when to start taking withdrawals from your retirement savings.
4. Where you live. Some people are eager to relocate after they retire in search of better weather, a less expensive place to live or to be near friends or family. But don’t feel pressured to move to Florida or Arizona just because everybody else is doing it. Some people move to Maine or Michigan because that’s where they want to be. And most people don’t move at all in retirement. The majority of retirees stay in their own homes or stay close to home to be near old friends and familiar places. The choice is up to you, depending on your finances, family and preferences.
5. How you live. Some people dream of traveling the world and have a bucket list that comprises dozens of exciting adventures and exotic destinations. That’s fine, if that’s what you want and can afford. But you don’t have to travel when you retire. Many retirees find satisfaction in helping to raise their grandchildren, volunteering in their hometown, spending time with a social group or playing their favorite sport. There are also much lower costs and perhaps less stress if you stay put. Now it’s finally time to lead the life you love, which might mean seeing the world or staying at home.
6. Whether to give back or hand down. If you’re confident you have enough money to carry you through retirement, you might want to leave an inheritance to your children or a legacy to your favorite charity. If so, consider giving away some money now when your children are getting started in life and could really use it. Similarly, if you have money earmarked for your church, alma mater or any other worthy cause, you might consider giving away the money sooner rather than later to take advantage of the tax deductions. Either way, it’s advisable to include your children in your planning process so they are aware of your desires and can plan their own futures.
Tom Sightings is the author of “You Only Retire Once” and blogs at Sightings at 60.