Top Moves To Make A Decade Before Retirement

Adjust Your Mindset About Retirement

Many pre-retirees idealize retirement as a time of freedom and a reward for a lifetime of hard work. Instead of thinking of it as a never-ending vacation, it is better to realize it is a period of up to 30 years of unemployment and take advice from Michigan retirement specialists. Begin to budget 10 years from retirement as most retirees will have a fixed income and will no longer have the discretionary income they had in their working years. It is very easy to expand your standard of living as your income grows. It is much more difficult to reduce your standard of living when your income is reduced. Start living based on your expected retirement income before retirement as a form of “stress test” for your retirement plan. Retirement planning Grand Rapids will also free up additional funds which can be used to pad your retirement nest egg. This will help you avoid the trap of trying to maintain a pre-retirement standard of living that your nest egg cannot support.

Develop Different Streams Of Income

Unlike many of our parents and grandparents, today’s retirees seldom have a defined benefit pension to rely upon. Fewer than 20% of private-sector workers are covered by a traditional pension. For that reason, it pays to develop other streams of retirement income and not rely only on social security and savings. Ten years prior to retirement is a good time to develop these alternative streams of income. A few examples

Rental Real Estate can be a great way to generate passive income during retirement. Many retirees have built a significant stream of income this way. By materially participating as a landlord, substantial tax deductions are available. A side benefit is that it allows a retiree to diversify their investment portfolio away from being 100% invested in “WALL STREET.” During times of market volatility, a consistent stream of rent checks can be very reassuring in providing retirement security.

Turn your hobbies into a source of retirement income. Examples: I had a client who was an engineer who loved woodworking. His hobby was building birdhouses out of rustic timber that looked like cottages. He and his wife travelled the U.S. in their R.V., going to shows and selling them. He filed a Schedule C on his tax return for his “business” which allowed him to write off many of his otherwise non-deductible expenses thereby creating his own personal tax shelter in retirement. Another client who was a municipal employee spoke French fluently and loved all things, French. She travelled to France many times during her working years. Once retired, she moved to Paris and became a Parisian tour guide for English speakers, using her encyclopedic memory to share what she loved, while getting paid for it.

Remember that “SAME” is your friend. After 35 years of retirement planning in Michigan, I can tell you with confidence that keeping the SAME house, the SAME car, and the SAME spouse helps achieve a successful retirement. Divorces are expensive, new cars are expensive and moving is expensive. All of these can place huge stress on a retirement plan. Obviously, there can be valid exceptions to this rule. Sometimes it makes sense to downsize and move into a condominium or retirement facility, however, the transaction costs and the financial impact are often not as beneficial as they may first appear. I have seen many clients sell their home to “free up” investment capital for retirement, only to find after the move, little capital is remaining for investment purposes. What they do often find is that they are living in close proximity to others, regretting their housing decision. For many, paying for additional services for their own home as they age is a better option than paying for the same services in HOA fees in a small condominium they regret purchasing. A retirement specialist will help you invest your money correctly for you and your family to enjoy stress-free retirement life. Rick Myers is a Certified Financial Planner™ and practitioner with more than 35 years of experience working with hundreds of clients in retirement planning. He is the founder and owner of Integrated Financial Services, Inc., located in Grand Rapids, Michigan.