Transition to Retirement: 4 Steps to Think ‘Both/And’ not ‘Either/Or’

Dana Brewer, CFP®
Jul 14, 2021 7:43:44 AM

Both-and-vs-either-or

Contemplating retirement can be both exhilarating and frightening at the same time. So many questions arise from a financial perspective and emotionally coming to terms with how you will use your time, engage in the world, and form and sustain social communities. But, unfortunately, we can often fall into the trap of limiting ourselves by limiting choices.

Creating Opportunities By Changing Your Perspective

When faced with the decision to retire, many of us think our two options are to continue working, possibly in a job you don’t love, or retire altogether. However, we can fail to recognize that possibilities exist beyond either/or thinking. Working with a financial advisor can help frame other opportunities--help you stop, reflect, and consciously determine what best serves you and explore what else is possible.

Both/And thinking can open us up to a world of possibilities where we can gain wisdom and insight from the either/or mindset and look for alternatives that may uncover new ideas or solutions. For example, might you consider the following as both/and instead of either/or:

  • working and taking more time off without pay
  • working and changing jobs to something you find more fulfilling even if it pays less
  • working from home so that you can relocate

Maintaining Perspective As Your Retirement Date Nears

As a financial advisor, I have found that around five years before a client’s desired retirement date can be an unnerving time. To give context to all of the planning decisions that will soon need to be made, the financial planner will use various tools to plan for the future while knowing that some of our assumptions will not play out as planned. Tax laws may change, markets will fluctuate, goals may vary the closer to retirement you get.

Questions a financial plan can help address:

  • How much investment risk do I take now and later?
  • When do I take my social security?
  • What if something happens and I need to retire earlier than planned?
  • What happens if I need a lump sum for an emergency?

Financial plans done well will incorporate both/and thinking and look at the planned outcomes and address contingency strategies for unplanned events as well.

Planning Opportunities Beyond Your Retirement Date

From the time one retires until the time when distributions are required from retirement accounts, there are often planning opportunities. Tax planning becomes the primary variable that frames decisions on creating the retirement “paycheck” you will need each month in the most tax-efficient way.

As financial advisors, we aim to model retirement plans with required distributions in mind. We do this to estimate future tax expectations. We then build an income strategy that can ideally distribute the income you need now at lower tax rates while considering how these decisions may impact your other expenses, such as health care costs. Each model is customized to consider your resources such as pensions, the tax status of your various investment accounts, social security strategies, etc.

Start Your Retirement Planning Early

Both/And thinking can be highly impactful for younger investors. Realizing with some planning, they can plan to cover their expenses and set aside money for their futures. Time is the biggest ally of any investor. The more time you can have your money invested, the more time it can work for you. Spending plans can help you not only get a handle on your spending but align your spending with what is important to you. Getting a reasonable estimate on your spending expectations in retirement is the first step needed to create a plan to guide your future retirement plan.

Learn more: Financial Tips: Smart Spending to Live Your Best Life in Retirement

At its most basic, both/and thinking along with starting your planning early may allow you additional time and thought to explore, consider, and reflect. The result is one can feel more ownership of the conscious choices they ultimately make and make a big difference in the success of your retirement plan.

New call-to-action

Investment Advisory services offered through Birchwood Financial Partners, Inc. an SEC Registered Investment Advisor.

All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. All financial products have an element of risk and may experience loss. Past performance does not indicate future returns. Opinions expressed herein are solely those of Birchwood Financial Partners, Inc., and our editorial staff. Material presented is believed to be from reliable sources; however we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser or qualified professional before making any financial decisions. We are not affiliated with or endorsed by the Social Security Administration or any government agency. The inclusion of any link is not an endorsement of any products or services by Birchwood Financial Partners. All links have been provided only as a convenience.

Investment Advisory services offered through Birchwood Financial Partners, Inc. an SEC Registered Investment Advisor.

All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Opinions expressed herein are solely those of Birchwood Financial Partners, Inc., and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser or qualified professional before making any financial decisions. We are not affiliated with or endorsed by the Social Security Administration or any government agency. The inclusion of any link is not an endorsement of any products or services by Birchwood Financial Partners. All links have been provided only as a convenience.