Are You Ready To Retire?

Are you ready to enjoy your golden years? Retirement is a goal for most investors, especially those who have faithfully contributed to their 401(k) plan for three or four decades. Is it time to cash in your chips and go all in on retirement?

A successful retirement requires years of planning and covers three main topics: Where will you live? What will you do? How will you pay for it? Let’s explore each subject.

Where to live?

A key component of retirement is where to live. Do you want to retire in your hometown or move to an exotic location? I love the beach, and living in Laguna Beach, La Jolla, or Maui ranks high on my list, but I also love the mountains, so Estes Park and Colorado Springs are strong contenders. I love sunshine, which removes the Pacific Northwest and the United Kingdom. I want access to restaurants, entertainment, sporting events, hospitals, and airports, eliminating most rural areas. After you decide on your retirement destination, will you supersize your home or downsize it so it’s economically affordable? Of course, if you invest well, you can own multiple homes. According to the Department of Labor, housing accounts for approximately 32 percent of expenditures for those aged 65 and over.[1]

List your top three retirement destinations.

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What will you do?

What will you do in retirement? Do you want an active retirement or one of leisure? I plan to hike, bike, ski, fish, dive into a good book, and watch movies. I also plan to volunteer and serve others. Having hobbies is paramount in retirement and will keep you active and focused. Another possibility is to turn your hobby into a revenue-generating machine by selling your goods through Shopify or Etsy. Hobbies can improve your health, and according to WebMD, they reduce stress, promote mental health, and improve relationships.[2]

List your top three hobbies.

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How will you pay for it?

After you decide where to live and what to do, how will you pay for it? If you plan well, then your resources should be able to support your lifestyle. Before you send the retirement email to your boss and colleagues, take an inventory of your assets. What do you own – stocks, bonds, mutual funds? In addition to your investments, will you receive a pension? And don’t forget Social Security because it will be a primary ingredient of your retirement income. How much income can you expect in retirement? If your investment portfolio is $1,000,000, expect an annual income stream of $40,000; if your Social Security is $30,000 per year, your projected retirement income is $70,000 before taxes. Keeping tabs on your expenses is a must in retirement, and controlling your spending can prolong your retirement assets. Of course, the opposite is also true. If you spend with reckless abandon, you could run out of money.

What are your top three sources of retirement income?

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Retirement is an exciting time, but do you need to wait until your sixty-five? No. If your assets support your lifestyle, you can retire anytime; no need to wait until your employer offers you a gold watch, but how do you know you won’t run out of money? A financial plan can tell you if you’re on track to leave the workforce. It quantifies your hopes, dreams, and fears and will project your future spending based on your current assets, spending limits, and financial goals.

A person retiring at age 40 needs more growth assets than one retiring at 75 – age matters. Owning stocks allows your money to combat inflation, and inflation will destroy your purchasing power if you leave your money parked in cash or T-Bills. Do not retire your assets when you retire because stocks can help you enjoy a fruitful retirement, despite their recent performance.

If you’re not ready to fully retire, consider taking a few months off as a trial run. Rent a home in a different city, cruise the seven seas or volunteer in a national park. Give it a try; you can always return to your nine-to-five job.

Beware the hobby that eats. ~ Benjamin Franklin

August 22, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so you can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. Ideally, I will own homes in Colorado and California to enjoy surf, sand, and snow.


[2], Venkat S.R. and reviewed by Poonam Sachdev, 5/23/2022

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