November 18, 2014

Landing the Plane

Credit: potowizard
Many of you know that I love analogies. One of my favorites that I use with people who are nearing the end of their careers is that they should think about entering into retirement like landing a plane. Whether the gainfully-employed ride has been smooth sailing or more than a little turbulent doesn’t really change the fact that you need to be prepared to land the plane. The retirement landing can be graceful and you can reach your home destination smiling, or the landing can go pretty poorly and even end in a fiery crash of sorts. Most people prefer the graceful landing that ends with smiling, so if you’re thinking about retirement, I thought I’d share a few tips on how you might want to land your very own plane.
  1. Get Your Cash Up – When working, I recommend most people keep around three to six months’ worth of their core living expenses in cash. In retirement, I’ve found that most people prefer a little more. If you have a particular cash number that helps you sleep better, go for it, but otherwise I normally recommend one to two years’ worth of your core living expenses in cash. That may sound a little crazy to you, but when your paycheck goes away (or goes down) when you do retire and there is a cyclical pullback in the stock market, you might feel differently.
  2. Have a Plan for Where Your Income Will Come From – If you have a pension, that’s really great, but where is the rest of the cash you need to fund your lifestyle going to come from? Randomly pulling cash from various investment accounts and haphazardly deciding when to turn on an annuity or start drawing Social Security is usually not a good strategy. You need a plan! There are tax implications and timing implications that need to be considered if you want to land as efficiently and effectively as possible!
  3. Strive to be Debt-Free – This may require using a decent chunk of your assets, or you might even decide that you want to work a year or two longer so you can do this, but if you can go into retirement debt-free, it is huge! Imagine how it feels to still get that mortgage bill you’re used to when you’re not getting that pay check you’re used to. Being debt-free going into retirement not only really seems to help many of my clients psychologically, but it also helps take pressure off cash and investment accounts. If your monthly mortgage payment is making up a sizable chunk of your fixed expenses, and you can make it disappear before you lower your landing gear, I’d be willing to bet you’ll feel a lot better.
  4. Make the Big Purchases Before You Retire – What? I’m telling you to spend money? Well, sort of. This may also sound a little batty, but if you are going to need something such as a new car or a new roof in the next couple of years, I’d probably suggest you go ahead and accelerate that purchase while you’re still working and making the big(ger) bucks. Assuming your retirement income will be a little lower than your working income, I’ve found that going ahead and taking care of some of the big ticket items can make your landing feel a little smoother. Put simply, big expenses can hurt the psyche and the pocketbook, but they seem to hurt less if you’re still working.
  5. Get to Know Your New Boss/Co-Worker – I’m certainly not a therapist, but I am observant enough to have noted that some people’s transition to a little more family time seems to go better than others. Sure, you’ll have to get used to spending a lot more time with your husband or wife, but that knife cuts both ways; they will have to get used to spending a lot more time with you, too! Working to improve your relationship with your spouse and developing some mutual and separate activities before you retire are probably really good ideas. I’ve heard it said that retirement is twice as much spouse and half as much money! I don’t know about that, but you get the point. Consider some relationship planning before you exit your plane and head to baggage claim.
  6. Think About What You’re Going to Do Once You’ve Landed – I know I said I’m not a therapist, but you need a plan for you when you retire. My busy, ambitious, and hardworking clients who eat, sleep, and bleed what they do for a living tell me that retiring can feel like jumping off of a moving train. The emotions of that jump and coming to a relative stop can be a tough adjustment. Take a trip, sleep in for a few weeks, do the crossword, but have a plan for after that. Things such as volunteer work, periodic consulting, gardening, car restoring, or woodworking can be good things. You’re going to want to have something to do. Retiring is a treat for some, but I’ve seen it be a difficult pill for others to swallow. Do as you wish, but I’d suggest you have some hobbies and groups lined up before you bid your boss adieu.
I don’t know about you, but I think the landing is one of the most important parts of a flight. If you’re beginning your descent and could use a little help making your approach, please let me know. This has been your captain speaking.

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