All of the years of hard work pay off once you have saved enough and given your resignation letter to your boss. There may be a few tears as you leave your job, but there's also the excitement of finally starting the new leisurely chapter of your journey. The next day, there's no need to get up before 10:00 a.m., so you get up and brew a morning cup of coffee. You sit down at the table and ask, "Now what?"
The start of retirement is a time of exploration for some people, as there's a new life routine to figure out. US News' recent article, entitled "4 Questions to Answer before You Retire," has a few questions to consider as you enter retirement.
Do you plan to reduce stock exposure? Typically you should gradually decrease the risk in your portfolio as you age and accumulate more assets to protect. Many folks will add bonds to reduce volatility during retirement. But there's no simple asset allocation that fits everyone. There's no way to determine the best split between stocks and bonds unless you can predict the future, so the key is to be flexible with your spending and never follow any rigid rules.
What's your strategy to withdraw money to meet daily expenses? Most people spend too much time trying to tweak their portfolio for maximum gains and too little time optimizing how to withdraw their assets in a tax-efficient manner. Decide how much you need to spend regularly and the source of the funds. Without a paycheck and with your assets spread between pre-tax, post-tax and taxable accounts, you want to know exactly how to take money out without paying more in taxes than is absolutely necessary.
What do you plan to do with your assets? There may be the opportunity to leave money to your heirs once you pass away. Put together a plan to make sure your cash gets used in a way you would like. Further, you can start gifting while you are still alive, so you get to see the benefits of your contributions.
What do you plan to do every day? This question may be the most important one to answer. Those who don't keep busy could see their health erode, and who wants to age prematurely? By staying active, you'll have the energy to pursue physically demanding activities, but leisurely ones will be more enjoyable with fewer aches and pains.
So enjoy that first coffee of retirement and begin your next activity with a clear idea of the source of the money to fund daily life. You've already spent years contemplating retirement's toughest questions. Now go enjoy it.
Reference: US News (November 25, 2015) "4 Questions to Answer before You Retire"