Retirement is changing.
That means planning for retirement is changing, too, according to Steve Starnes, principal at Grand Wealth Management.
Part of the change is increased life expectancy. An additional 20-plus years of not doing anything in retirement can be a stressor, and not just because of the money.
“Not doing anything is hard for a lot of people, whether they need the money or not,” Starnes said. “It seems like there’s a greater value around purposeful living and work. If we’re living longer, people are prioritizing enjoying what they’re doing and getting more value out of it than they perhaps used to.”
There also is the reality that fewer workers get to retire with the comfort of a pension.
With a longer retirement, financial planning needs an even greater focus. While most people tend to really get serious about five years before they hang it up, Starnes said the reality is most people should start saving more than 10% of their salary as early as possible.
“Whenever you start is better than delaying it until tomorrow,” he said. “If you save 10%, you’ll be in good shape. If you save 20%, you’ll have a lot more flexibility.”
The later one starts saving, the higher that percentage needs to be, however.
The good news for those who weren’t great savers, or those who just like a paycheck, is it’s not unusual for retirees to keep working even after “retirement.”
“In terms of retirement, the financial thing is not the biggest thing people should contemplate,” Starnes said. “People underestimate how much they miss working, the social reward of meeting with colleagues and clients, the feel of value of being at work.
“What we’re finding is a majority of people may take a pause for a year or two, then they figure out that maybe they don’t need to work for money, but they want to do something rewarding.”
That reward could be just the dopamine hit of receiving a paycheck or the satisfaction of helping people while volunteering. Then there’s another phase that has evolved, Starnes said, that leads into a time when the leisure activities really set in.
No matter where a client is in life, Starnes said they generally worry whether they’ll have enough money saved for retirement — and that includes those with more than enough.
“It is scary to go from having a consistent paycheck to not and it usually takes a year or two to settle in,” he said.
From there, it’s just being conscious of what’s being spent and what money is still coming in, whether that’s Social Security, new paychecks or income from investments. And when the markets are a little shaky, as they are this year from the conflict in Europe, investors should just stay the course, he said.
“There’s always something to be worried about,” Starnes said. “A good plan accounts for the fact these things will happen. If a plan is well-designed and the unexpected happens, it’s just trimming at the edges to bring it into alignment.”
This story can be found in the May/June 2022 issue of Grand Rapids Magazine. To get more stories like this delivered to your mailbox, subscribe here.