The question looms for most everyone in the workforce: When will I know I’m financially prepared to retire?
Jeffrey S. Chernitzer, CPA/PFS (Personal Financial Specialist), a wealth advisor with Buckingham Strategic Wealth, agreed to offer Jewish News readers some areas to consider and questions individuals should ask themselves when planning for their future.
Jewish News: How long have you been working with clients on their retirement plans?
Jeff Chernitzer: More than 30 years.
JN: When should planning for retirement begin?
JC: There is a Chinese proverb that says, “The best time to plant a tree was 20 years ago. The second-best time is now.”
Time, spending, and saving are the three biggest factors to consider when thinking about retirement. These are also the three areas that you have the most control over, as well. It is never too early to start planning for the future.
JN: What questions should people answer before making the decision to retire? Or, as they work towards that goal?
JC: Two things come to mind: Are you financially ready? And are you mentally prepared? Think about how you will spend your time in retirement. We have seen people fully prepared for the financial aspects of retirement choose to go back to work because they so strongly identified with their profession that they couldn’t stay away from it.
It’s important to think through what you will do with the extra time you will have when you stop working. Often, individuals will choose to continue working later in life, but perhaps part-time. Either way, it’s important to have a plan in place so that work is optional, not a requirement.
JN: How do you help clients prepare for retirement?
JC: We use a holistic planning approach in addition to asset management. We help clients with tax planning, cash flow planning, Social Security planning, estate planning, charitable giving, and business transitions. Beyond the financial aspects, we work with clients to plan for the legacy they wish to leave for their family and community.
JN: How does someone know they will be financially secure in retirement?
JC: This is a difficult question. A technical answer, or the general rule of thumb, is that your money will last you for 30 years if you only take out 4% of your investable assets per year. That can be a helpful gauge for someone considering their security in retirement. However, even the best financial plans are subject to change. Whether it’s tax rates, inflation, market performance, or health status, we do not have full control over all the variables involved in our financial lives.
Unfortunately, not everyone can plan for every eventuality. The best financial plans are flexible.
Great software tools are available that allow you to use your information to get a projection on what retirement may look like in your circumstance.
JN: Is there a magic age for retirement? How does someone know they will be financially secure in retirement?
JC: The magic age is the age you want to retire. There are some folks who want to retire early, perhaps in their mid/late 30s who live minimally in their 20s to make that a reality. There are others who are searching for a more balanced lifestyle and stick to the “tradition” of retiring when they reach Social Security age. Some people would choose to retire early if they had the financial means to do so. Others have the financial means to retire early but love their work and choose to work their whole life.
JN: Have you had clients retire before they were fully prepared? With what results?
JC: We have had clients retire even though the software I mentioned earlier predicted they were not financially prepared, but they knew that they may have to make lifestyle changes sometime in the future as a result.
JN: What is your #1 piece of advice for anyone contemplating retirement?
JC: Seek professional guidance from a fee only advisor to help develop a plan. It’s important to find an advisor who will take into consideration both the financial and emotional aspects of planning for your financial future.
JN: Last words?
JC: I would encourage you, even if you don’t feel prepared or that you aren’t where you should be at this point in your life, many people will live into their 90s and older, so start planning today. It’s not too late!
Jeff Chernitzer, CPA/PFS, may be reached at jchernitzer@buckinghamgroup.com or 757-533-4103.
–Terri Denison