By Jane Peterson For MediaNews Group Mar 15, 2020
It can be challenging for many people to transition from accumulating wealth for retirement to preserving and distributing it. Photo courtesy of Metro Creative Connection
Remember years ago when you made a retirement plan? You were committed to saving during your peak earning years and you did it – so now what do you do? How do you move from accumulating wealth to spending what you worked so hard to save?
It's a challenging transition for many, said Christopher J. Berry, certified elder law attorney known locally for his work with The Elder Care Firm and Castle Wealth Group. It can be unsettling after growing income through Social Security, pensions, a 401K and other assets for years to go from accumulating wealth to preserving and distributing it.
The most important action to take is to create a budget, said Nicole Gopoian Wirick, JD, CFP®, president of Prosperity Wealth Strategies LLC in Birmingham. A budget is designed to keep your spending on track, but what it ultimately does is provide you with peace of mind.
A budget, said Berry, provides freedom to live as you choose. He said it's empowering to know where your money is going to go so you stay in control. After all, you've worked hard for this.
Look at it this way: Let's say your retirement plans include traveling to France with your spouse and taking the grandkids on a trip to Disneyworld. You know the money is there for both trips, but you're probably going to have less anxiety about spending it if you know that you have a plan, not only for the amount you want to spend on the trips, but also for daily expenses when you return home.
Wirick said retirement can last for 20-30 years, so you have to be prepared for the long haul. That means defining your goals for retirement and making sure you have the funds for them. After all, no one wants to spend their retirement worried about money. You want to have enough money for your dreams and wants as well as your daily responsibilities and bills.
That's why a retirement budget can look so much differently than the family budget you've been using for years. You still need to include the basics like food, utilities and taxes, but a retirement budget may include less funding for work-related expenses like clothing, gas and eating out and more for recreation, travel, entertainment and healthcare.
Berry suggests including items in a budget based on time. He said to take a look at the money you need now and through the next year as well as having an emergency fund readily available with three to six months worth of expenses. Also, include a later part in the budget for the next five to 10 years worth of expenses. What this does, he said, is break assets down to make funds available when you need them.
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About three to five years before you want to retire, start developing your plan, said Berry, making sure to consider tax planning and long-term care costs.
Making the transition into retirement can be challenging. Not only do you have to adjust to not having to be somewhere every day, but you have to be comfortable with the aspect of spending your wealth instead of accumulating it. That can create anxiety, but a long-term budget will show you how to achieve your retirement goals while having the cash on hand you need to live comfortably.
“Retirement is about the joys in life and that is truly different for everyone,” said Wirick.
It's never too late to begin planning, she said. She said to design a budget, start with reviewing a year's worth of statements. This will show you where your money has been going. In different colors, highlight four different areas:
• Must haves, such as regular bills, mortgage payments and food
• Nice to haves, like new furniture and clothes and your favorite expensive coffee
• Non-monthly must haves, such as property taxes
• Non-monthly nice to haves, like Christmas presents
Develop a plan from there and make sure to update it annually as plans and expenses change, she said.
What retirement planning looks like
Many of us dream about retirement for years. The thought of not having to get up early every morning and fight heavy traffic and deal with stressful situations is appealing. Instead, we picture retirement being calm, with plenty of time to relax, maybe travel, spend time with friends and family, pursue new hobbies – even start our own small business.
While retirement definitely looks different for everyone, Nicole Gopoian Wirick, JD, CFP®, president of Prosperity Wealth Strategies LLC in Birmingham, said it should include a plan for organizing all components of your financial well-being, such as:
• A way to address different potential risks, such as a long-term care situation
• A legacy plan that you have discussed with your children
• A regular update to adjust to life's events