When people think about their ideal retirement, they typically think of relaxing on the beach, spending time with loved ones or just enjoying the fruits of their labor. But what happens after you leave the beach? What do you do the rest of the year? What does retirement look like five years, 10 years, 20 years in the future? Here are six key questions to ask yourself to help you define, and potentially achieve, your ideal retirement.
1. When do you want to retire?
As you consider your desired retirement age, remember — the earlier you retire, the more you’ll need to save, and you’ll have less time to do it. Depending on your retirement age, you may also need to develop strategies to meet your retirement income and health care needs until you are eligible for key benefits like Social Security, Medicare and penalty-free withdrawals from your retirement accounts.
Here are some important ages to keep in mind when planning at what age you want to retire:
Eligible for penalty-free withdrawals from retirement accounts without exception
Eligible for Social Security benefit at reduced benefit amount
Eligible for Medicare
Eligible for full Social Security benefit if not claimed earlier; exact age depends on birth year
Eligible for maximum Social Security benefit if not claimed earlier
2. How will you take care of your health?
Many people’s greatest financial worry in retirement is health care costs, especially long-term care costs.1 And it’s no wonder given that health care will probably be one of your largest expenses. Plus, once you leave your employer, you may have to navigate health care coverage without their help.
The best way to prepare is to have a plan. As you plan for health care costs in retirement, you’ll want to take these key actions:
- Know your family medical history. Understand what you can about health issues that run in your family as well as history of longevity.
- Learn about Medicare. Medicare will play a critical role in your retirement. You’ll want to understand enrollment timing, coverage options and costs.
- Avoid a coverage gap. If retiring before age 65, you’ll need to have a plan for health care coverage until you’re eligible for Medicare.
- Develop a strategy for long-term care. Neither Medicare nor Medicare Advantage cover the highest-cost aspects of long-term care, such as an extended stay in a nursing home, which averaged $95,000 in 2021 for a yearlong stay.2 While long-term care may be a difficult topic, active discussion about your potential needs and how you would want care to be administered will better position you and your family.
3. How do you want to spend your time?
Once in retirement, you’ll likely have more free time available than you’ve had in decades. For some, that may feel liberating, but many new retirees struggle to find a sense of purpose in their daily lives. To get a better sense of how your time might be spent, consider outlining your schedule for your first week, first month and even your first year in retirement.
Are there large gaps of time in your schedule? If so, how might you fill it in ways that give you meaning and a sense of purpose? While everyone’s ideal retirement is different, common activities include:
- Spending quality time with family and friends
- Taking steps to improve health/fitness
- Pursuing hobbies and interests
- Learning new skills
Identifying fulfilling ways to spend your time in retirement can better prepare you for your transition and help reduce the feelings of disorientation and uncertainty common with new retirees. You may even want to test-drive some of your anticipated activities to see if they suit you.
It’s also important to think about the things you want to stop doing in retirement. If you want to pay someone else to do them, you’ll need to factor those costs into your retirement budget. Additionally, how you spend your time is likely to change as you age, so be sure to account for those changes when planning.
4. Where do you want to live?
Deciding where you want to live in retirement is another big question to answer before you retire. Do you plan to stay in your current home or move? Are you moving in-state or to a different state or country altogether? When deciding where to retire, you’ll want to think about how you want to spend your time and ensure your location will support it. You’ll also want to consider factors like proximity to friends and family, safety, access to quality health care, climate and affordability, which can vary greatly across the United States and abroad. And you’ll want to consider whether it’s a home and location you can see yourself aging in as your needs are likely to change over time.
Whether you move or retire locally, you may want to consider downsizing your home. A smaller home can reduce your utility bills, maintenance costs and property taxes, and you may even net a gain on the transaction. It also means less time spent cleaning and caring for your home, which is another consideration, especially as you get older.
5. What kind of lifestyle do you want to live?
Think about the things you need and want in retirement: How much will you splurge on each? Will it be more or less than what you spend today? Are there any major purchases you would like to make? The more you want to spend in retirement, the more you’ll need to save, so we’ll want to be sure to incorporate your lifestyle goals into your strategy.
6. Do you want to give to others?
Many Americans want to give to others during their lifetime and/or after they pass. If giving is important to you, you’ll need to define your giving goals so they’re incorporated into your strategy. As you consider your giving goals, think about the:
- Recipients: Do you want to give to your family, church, community, charity?
- Timing: Do you want to give assets during your lifetime or leave an inheritance?
- Type of gift: Do you want to give financial assets or nonfinancial assets?
- Amount: How much do you want to give to each recipient?
If giving is important to you, consider donating your time. Volunteering at a nonprofit or babysitting your grandkids can give you a sense of purpose and benefit your recipient financially without risking your retirement.
Don’t sweat it if you don’t know the answers to all these questions right now. Think of this as a helpful self-reflection exercise to do as you get closer to retirement. And even though there’s a lot to think about, your Edward Jones financial advisor can help you better prepare for the financial impact of not working full-time — whenever that may be.
1 Edward Jones/Age Wave study, “The Four Pillars of the New Retirement: What a Difference a Year Makes,” 2021.
2 Genworth 2021 Cost of Care Survey, cost of semi-private room.