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Making retirement dreams a golden reality - a how-to guide

10-10-2024

Whether your idea of golden years perfection is training for an Ironman, launching a business, watching a ball game in every U.S. state, or simply spending more time with family and friends, retirement offers a unique opportunity to replace the nine-to-five with something vivifying, meaningful, and new.

Are you ready to get from here to there? Read on.

How do you want to spend your retirement years?

It’s important to remember that retirement planning is never a one-size-fits-all endeavor. How could it be? We’re all individuals with varying fiscal resources and responsibilities.

Which is to say, before you can plan for your retirement, you have to define it—and its costs.

Here are a few examples of pursuit and price tag:

  • Launch a new business. A sole proprietor-based entrepreneurial venture can be launched for as little as $5000 or less, according to the U.S. Small Business Administration. Of course, the ultimate cost will depend on the type of business launched, capital investment needs, legal requirements, and other factors. A starting costs calculator can help you figure out how much you’ll need to set aside to get your idea off the ground.
  • Travel the country in an RV. According to The Wayward Home—a blog about living a nomadic life—RV living can cost between $1400 and $3000 per month. That amount includes an RV payment, campground rent, gas, insurance, and utilities. Consider running your numbers through an RV cost of ownership calculator before striking out on the open road.
  • Write a book. A retiree can self-publish a book for less than $700—a price tag that encompasses editing service, a pre-made book cover, and promotion, but not any workshops or classes.

Build out the costs associated with your second act

What financial barriers may get in the way of your dream retirement? The cost of out-of-state Patriots tickets? Sky high real estate costs in your favorite beach town? Airline tickets to visit your grandkids a few times a year? As they say, forewarned is forearmed. Knowing your retirement plans up-front allows you to save more effectively for it during your income-earning years.

While you’re calculating costs, keep these considerations in mind:

  • Healthcare costs don’t end with retirement. Even after Medicare, Americans can expect to incur an average of $122,000 in medical costs after age 70.
  • The Association for Long Term Care Planning estimates the cost of long-term care can average between $1563 and $8365 per month, depending on the type of facility chosen and your state of residence. A long-term care insurance policy can help defray those expenses.
  • Income taxes. Retirement plan distributions and social security pay-outs may be taxed as ordinary income.

Subtract the career-related costs you’ll no longer be paying

Here’s some good news: There are career-related costs many retirees can eliminate once they’re no longer trekking to the office, ranging from commuting expenses and dry cleaning to lunches out with colleagues. Retirees also often pay less in income taxes, can avoid peak travel costs, and—with proper planning—may even have the mortgage paid off.

Which expenses will you no longer incur once you cut ties with the office?

Tally Your Expected Retirement Income

Retirement income can come from many different sources, including:

  • Tax-advantaged defined contribution retirement plans such as a 401k or 403b, a small-business plan like a SEP or Individual 401k, or an individual retirement account (IRA).
  • A defined benefit plan—an employer-sponsored pension plan, for example.
  • Investment income from non-tax-advantaged accounts such as stocks, bonds, mutual funds, or exchange traded funds.
  • Regular payments from an annuity or life insurance policy.
  • Any income earned from the launch of a second business or income-producing hobby.
  • Social Security

Your financial planner can help you calculate the expected short- and long-term payout for each account if the information is not readily accessible from your investment company.

Add it up

Once you determine just how much money you’ll need to realize your ideal retirement, it’s time to set a plan in motion to both cover your basic needs and make those dreams a reality. A financial planner can provide you an outside perspective and offer a range of options to help you make the most of your resources—now and in the future.

This information is general in nature, may be subject to change, and does not constitute legal, tax or accounting advice from any company, its employees, financial professionals or other representatives. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your situation, consult your professional attorney, tax advisor or accountant.

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RO 3927552 (10/2024)