Sometimes we focus on the wrong thing. We focus on the result, not the process. With retirement planning, everyone wants to know what their magic number is. How much will a person need to retire comfortably? In reality, that number can change based on many factors of a person’s retirement. We should disengage from traditional thinking and focus on what retirement should look like. Here are three items to discuss that will help determine that retirement number.

Social Security:

For most people, Social Security payments represent most of their income in retirement. The temptation
is there to take Social Security as early as possible at age 62, but that may not be the right choice. Each
year a person delays Social Security payments, they will receive an increase in their payout up until age
70. Determining when to take Social Security payments comes down to a few factors: health (life
expectancy), other income sources, taxes and if working in retirement is a possibility (benefits may be
offset by income from working).

For single people, picking when to take Social Security payments is the only decision to make. For
married couples, widows/widowers and divorces Social Security planning is more complex. Spouses with
different incomes have decisions based on which spouses Social Security income should come first.

If a person’s been married for at least 10 years, they will have access to their ex-spouses Social Security
payments. Looking at different Social Security scenarios and figuring out how to maximize payments in
retirement can provide substantially more income over the course of a retirement.

Medical:

Medical expenses will be one of the largest expenses for any retiree. For any retiree this may be their
first time off their employer’s health plan. Medicare plans can be complicated to understand since there
are different types of coverage (Parts A through D) and different types of Medicare supplement plans.
Early retirees will have to figure out a way to get coverage in order to bridge the gap before they are
eligible for Medicare.

As a retiree ages, they may have to think about getting care for nurses or even long-term care coverage
in a facility. With the cost of those facilities increasing at a rapid rate, having a plan for long term care
costs is critical. The options to cover those costs range from self-funding to getting insurance coverage.
Determining which option is best depends on a person’s asset level, health/ability to get coverage,
premiums, and desire for control over their care.

Housing:

Housing is a retirement multiplier. Housing is one of the largest expenses in retirement and deciding
where to live can have a significant impact on a retirement. Where a person lives determines their state
income tax, property tax and estate tax rate. Determining the type of house is important to. Some
retirees want to stay in their home forever, some want to downsize, and some want to buy a vacation
home. Other retirees will carry a mortgage, and some want to have their houses paid off before they
retire.

Each decision will dictate the cost of retirement. Modeling out the impacts of each decision prior to
retirement can help a person understand how much money is needed to retire successfully. Keep in
mind that some of these decisions can be forced on a person to. It’s never a bad idea to discuss different
housing scenarios and their impacts.

There are numerous decisions a person must make in retirement. Most of them are small, but there are
a few that are significant. Getting those decisions wrong can mean less money in retirement, less
freedom and maybe even less time with family. Asking for help with these decisions is recommended
and a proper advisor can model out the impacts of each decision.