4 Questions To Answer When Planning For A Happy Retirement


According to a study done by Wes Moss, the happiest retirees spent, at least, five hours each year planning their retirement before they actually entered it. No matter if you’re just around the corner from retirement, or perhaps it’s still a far off thought, take the time today to plan for retirement so when the day comes when you can stop setting your alarm, you can retire the confidence of having a full plan in place.

A good place to start is by answering four questions. We have worked with many people on the verge of retirement and helped them transition financially confident into retirement. One thing that I have learned is that answering these questions early… well before retiring… helps someone actually pull the trigger on retirement. All too often we see people talk about retirement and then get gun shy when the date comes because they haven’t fully answered these four questions.

Even if you’ve answered these questions before, it’s a good idea to review them once more to see if any of your answers have changed. Keep these answers as up-to-date as possible to be sure you’re on track with your retirement strategy.

Question #1: What is your asset allocation?

Asset allocation simply means your investment mix of stocks and bonds. In retirement, you typically want to utilize the assets you have invested to generate income. Typically this income comes via dividends from stocks, interest from bonds and distributions for other investments. The key to getting the appropriate asset allocation is balancing risk but still having some stock exposure to help you keep up with inflation. Stocks tend to be a good inflation hedge.

At Wela, we use OYA which means, "own your age" in income. It’s a good rule of thumb when determining how your portfolio should be allocated. If you are 60 years old, then the rule of thumb would say to have 60% in the income bucket (investments that have a guaranteed but lower return like bonds) and 40% in the growth bucket (investments that are riskier but have the potential for a higher return on investment, like stocks). If you’re 40 years old, then this rule of thumb would say you should have 40% of your portfolio in the income budget and 60% in the growth bucket.

We have a tool inside the Wela portal which can help you quickly calculate exactly how you should be invested based on this rule of thumb, and you can chat with an advisor about your retirement investment strategy. Sign up here.

Related: [Infographic] How To Own Your Age In Investments

Question #2: How much do you spend every month, and how are you going to fill this gap?

This is how you determine exactly how much savings you’ll need in retirement. Identify what your monthly needs will be in retirement. How much money are you going to need to keep the roof over your head, food in the pantry, yourself insured, and then have some fun?

We suggest you start by looking at what you are currently spending on a monthly basis. Then take that number and see how it will change based on what you envision for your retirement. Will you have these same expenses in retirement, or do you plan to pay off your house beforehand? Do you want to travel more or are you going to move to and stay at the beach? There is a general rule of thumb in the financial planning industry that people will live off of 70% of their pre-retirement salary once they’ve retired, but that number may change based on your plans for retirement.

Once this number is understood, you have to identify what streams of income will help you hit this spending amount. We recommend that you first look at your Social Security, pensions, rental income or any other streams of income. Once you’ve added these amounts, whatever the difference between this amount and the amount you want to spend would be filled by income from your investments.

The basic idea here is that if you need $4,000 per month to live on and you have $1,500 coming in from Social Security and a small pension, this would mean that your investments would need to generate $2,000 a month for you in retirement. Wes Moss has a rule of thumb that says for every $240,000 you have invested, you can expect to withdraw $1,000 a month in retirement.

$240,000 x 5% (withdrawal rate) = $12,000 / 12 months = $1,000/month

Related: How Much Money Do You Need For Retirement? It’s Not As Simple As Following A Chart

Question #3: What are you going to do daily in retirement?

You’ve hopefully already thought through this a bit while answer question #2, but it’s important to know what you’re going to do in your retirement. It is necessary to have a strategy for how you plan to stay active in both a mental and physical capacity. Just because you have time to sit on the couch, doesn’t mean that you should. Think about this seriously before you retire, and get a plan! Whether that means volunteering with a local charity, playing golf daily, or just regularly spending time with your grandchildren, having a plan in place for how you’ll use your new found free time with help keep you mentally and physically in better shape.

Question #4: What do you want to do with your money?

This question needs to be answered with where you want your money to go when you are no longer here anymore. Do you want to leave it to heirs, do you want to put it in a trust, or donate it to a charity? This question should be answered before retirement so you can properly plan your estate. You’ve worked hard to grow your nest egg, so don’t leave it unprotected and without a plan.

Related: Estate Planning Basics

Retirement is nerve wracking because you are transitioning from having a steady paycheck that is fulfilled by an outsider to having to fulfill your own paycheck. By answering these questions, you can move into retirement comfort with this new reality. These are questions we oftentimes work with users and clients at Wela to answer. If you have a question about planning for retirement, your investment strategy, or maybe your financial goals, create a free Wela account today to talk with one of our advisors. We’re here to help.



Disclosure:  This information is provided to you as a resource for informational purposes only.  It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.  Past performance is not indicative of future results.  Investing involves risk including the possible loss of principal.  This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.