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The 5 Most Important Questions to Answer Before You Retire Thumbnail

The 5 Most Important Questions to Answer Before You Retire

“Thirty seconds, two hours, four days, and twenty-five years.”

A friend of ours who is on the verge of retiring recently joked about a younger colleague who is already maintaining a retirement countdown clock more than two decades in advance! While not everyone has the same precision (or anticipation) when it comes to thinking about their retirement date, there’s no denying that retirement is a massive life transition and one that requires planning and foresight. For anyone considering retirement, or financial independence as we prefer to think about it, there are many important questions to answer before taking the leap. We recommend starting with these five.

1. What does YOUR retirement look like?

It doesn’t matter what retirement looked like for your parents or what your friends and colleagues imagine it will look like for them. What matters is your vision of retirement, and there’s no right or wrong answer here. When it comes to work, some people will stop entirely, others will work the same number of hours but in a job they truly love, and everything in between. We know a local tailor who, in his eighties, still works most days of the week with the big smile of someone who loves what he does and is thoroughly enjoying his version of “retirement.”

But retirement is about more than just how your work life will change. You’ll also want to think about how you’ll spend your newfound free time. After a long career, sitting by the beach or golfing every day for the first year or two may be exactly what you need and want to do. However, even a “traditional” retirement can last 30+ years and at some point, the complete relaxation may turn to boredom. We’ve seen how challenging it can be to downshift to a new routine and schedule in retirement, so it’s important to plan ahead and be intentional about what the next chapter of your life will look like.

2. What’s it going to cost you?

Will the kids finally be off your cell phone plan? (Hopefully.) Will the mortgage be gone? Will you travel more? Think about how your expenses will change in the next phase of life and what it will cost each year to support the lifestyle you envision. People often assume they’ll need to replace 100% of their working income in retirement, but usually that’s not true. With a lower tax rate, no mortgage, smaller expenses related to the kids, and money no longer going to retirement savings, most people need far less than their working income to support a similar lifestyle in retirement. When going through this process of determining the cost of retirement, we find it helps to break out expenses into fixed items that are relatively stable each year (real estate taxes, utilities, food, clothing, etc.), discretionary costs that fluctuate (eating out, travel, shopping, etc.), and large one-off purchases (new cars, weddings, a second home, etc.). This gives you a better sense of whether you can afford to retire and how much “wiggle room” you have if you need to cut back on spending at any point.

3. How will you create a “paycheck” in retirement?

During your working years, you have the benefit of receiving a regular paycheck, which you then decide how to spend or save. In retirement, there are more moving parts. You might have money coming from numerous sources, including Social Security, a pension, investment accounts (401ks/403bs, IRAs, brokerage accounts, etc.), and even employment, if you decide to continue working in some capacity. We find it’s easier to transition into retirement by recreating your own version of a “paycheck” that comes in once or twice a month. Once you determine that you have enough money to retire with the lifestyle you desire, you’ll want to optimize how you use your income sources and investments to create that paycheck. Being intentional with how you do this, particularly how you claim Social Security and spend down your investment accounts, can save you a ton in taxes and ensure that you stretch your money as far as possible. 

4. What’s your plan for healthcare?

If you want to retire before age 65, do you have a plan for healthcare costs? If you have to buy private health insurance prior to age 65 (when you become eligible for Medicare), premiums alone can cost $1,500-2,000 per month for a couple. Be sure those potentially tens of thousands of dollars of annual healthcare expenses between retirement and age 65 are included in your retirement plan. Once you become eligible for Medicare, your costs will decline, but you’ll still want to understand your options and be sure you have the right coverage, including a prescription drug plan and a supplemental policy to cover any gaps in Medicare. Beyond health insurance, it’s important to have a plan for how you’ll handle potential long-term care costs, whether that’s self-insuring or buying insurance. While few people like thinking about these things, having a clear plan prior to retiring will save you a lot of headache and angst in future years.

5. What’s your investment plan?

Retirement is a balancing act between enjoying your money today while ensuring that it lasts through your entire retirement. It doesn’t matter if you earn 30% returns every year prior to retirement if you end up on a park bench at age 85 without a penny to your name. The first step is having a clear and sustainable retirement plan that reflects your goals and values. The second step is building an investment portfolio that’s designed to meet the objectives of that plan. For most people, this involves having enough “safe” investments (like bonds) to fund your annual expenses, but also enough “growth” investments (like stocks) to allow your lifestyle to keep pace with the significant increase in cost of living that accompanies a 30+ year retirement. With any portfolio of stocks and bonds, it’s important that you are comfortable with the investment mix to avoid making emotional mistakes, like selling in response to market declines. We call this “right” mix of stocks and bonds a SWAN portfolio (Sleep Well At Night).


Retirement, whether it’s a year from now or thirty seconds, two hours, four days, and twenty-five years from now, should be a time to truly enjoy. And knowing that it can be a third or more of your entire life, it’s worth spending the time beforehand to ask the big questions and thoughtfully design your ideal retirement (and life, along the way). It’s easier to get somewhere with a map and directions than by guessing and wandering, and retirement is no different. Answering these five questions is a great starting point for putting together a plan and gaining confidence as you move toward retirement. 


About MD Wealth Management: We are an Ann Arbor financial planner that specializes in providing financial planning for physicians and retirees. We are CERTIFIED FINANCIAL PLANNER™ professionals and fiduciary financial advisors who operate on a fee-only basis, which means we do not sell financial products or collect commissions. As an Ann Arbor financial advisor, we enjoy working with clients both locally and remotely.