Retirement is about looking back on all your hard work and accomplishments over the years and starting on a new life journey comfortably.
However, retirement is different for everyone, and no one should be boxed into a retirement plan that’s meant to suit everyone over the age of 65. I’ll never forget the day when it struck me how different retirement goals can range from one individual/couple to the other.
When my wife and I lived on Beacon Hill early in our marriage, we noticed several affluent retirees were moving in as the people with young children were moving out. I remember walking the dog one day by a particular brownstone we called Wellesley Way. Four retired families had sold their homes and moved downtown to take advantage of everything the city offered. Their retirement decisions struck me as funny, odd, and aspirational.
People usually think of retiring to the suburbs, right? Retirement means moving out of the fast pace of the city and into something a little more quiet and relaxed, right? These retirees weren’t looking for quiet nights and a bi-weekly trip to Applebees; they wanted to enjoy all the city could offer them!
The couples all had dogs, and we often saw them enjoying the social aspects of the city. Additionally, they could have the grandkids visit and spend a day showing them the museums and playgrounds, all accessible by foot!
While seeing those retired couples, I realized how different everyone’s retirement goals are; and how we should never assume the typical retirement plans and strategies are appropriate for everyone.
If you can afford it, there are endless opportunities to keep busy and enriched in retirement. But what are the best ways of getting there? Especially when planning to retire in Massachusetts, one of the country’s most expensive states.
Different Types of Retirement
As a family financial planner, it’s my job to help people get perspective on their goals and think about retirement planning about their specific needs. This article will discuss the various ways to plan your retirement in the Bay state and how your retirement goals may not be as lofty as they seem.
Some people will have state-run retirement plans and pensions waiting for them after finishing their careers, but most will not.
Retirement After Working for the State
If you worked for Massachusetts, there are plans for pensions and retirement outlined by municipalities. The official retirement age in Massachusetts is 55, or if your membership began before January 1, 1978. But, anyone is eligible to retire as long as they have at least 20 years of creditable service to the state. Be aware that these policies apply to those eligible for retirement through superannuation; this means that one attains retirement due to age.
It’s always best to do some basic research to determine if these same qualifications apply to your career and age. For example, Massachusetts police officers and teachers may be eligible for early or later retirement, but not everyone will have a pension to live off of.
Retirement for the Rest of Us
When you stop working, life becomes expensive. For retirees, It’s estimated that 70-80% of preretirement income will be spent on basic life essentials. GOBankingRates compiled a list of average age and costs of retirement by state. This list was based on a study completed by Money Talks News. According to that study, 66 is the average age of retirement in Massachusetts, and the annual cost for a comfortable retirement in the state is $77,122.
Despite the obstacles that come with the retirement process, there are ways to avoid major setbacks. Here are some of the foundational principles that can lead to a successful retirement.
- Start Saving Early, But Don’t Punish Yourself
Right, I know it’s not a big shock that the retirement plan advisor tells you to save money, but It’s true that it’s never too early to start saving for retirement. However, take simple steps and start small – it’s about making sustainable plans and choices for saving, not making you and yours uncomfortable.
Some people will tell you that “skipping that Starbucks” coffee will help you save for retirement in remarkable ways. While it’s true that cutting down on frivolous spending is helpful, don’t deprive yourself of things you enjoy. An advisor will help you discover budgeting strategies that don’t force you to give up that coffee or other daily pleasures and still be successful.
- Explore Your Options With Your Employer
Work with your employer to find out if they offer a retirement savings plan fit for you. This can include a 401(k) plan that will make your taxes lower and encourage automatic deductions. Compound interest and tax deferrals will significantly change the amount you accumulate over time.
Your employer may have a traditional pension plan. If that’s the case, find out if you’re covered by the plan and discover how it works. Ask for an individual benefits statement and check to see what will happen to your pension benefit if you plan to change jobs. Find out what benefits you may have from another employer. Consider what options your spouse may have and what types of plans their employer offer, and choose the most sense for your needs. Don’t ever feel stuck because there is a multitude of options available through different employers.
- Consider Investment Opportunities
Making your money work for you is a low-risk steadfast retirement strategy. Find out how your savings or pension plan is invested and learn about the available options. Try putting your savings in other investments to reduce risk and increase return. Your life plans, financial stability, and age can change your investment choices over time, so stay in touch with an advisor to adapt to the different circumstances and points in your life.
- Individual Retirement Account Opportunities
When planning retirement, there are many avenues to take, but seizing every opportunity to keep more money in your pocket and tax-deferred is critical. An Individual Retirement Account allows you to set aside money for future investments. Individuals can store up to $6,000 a year into their IRA. If you’re 50 years old or older, you can add more to that amount. An IRA provides tax advantages, and users can store a small amount of money to start when they’re further from retirement/making less money.
Enjoy Your Life
In Massachusetts, retirement can feel daunting, but it’s not impossible, trust me. A retirement plan needs to be sustainable. An analogy that comes to mind is that saving for retirement is like making a healthy lifestyle/diet plan. You can’t binge and purge and expect the results you want. You can still make yourself and your family comfortable without sacrificing a successful retirement strategy.
To learn more about sustainable and individualized retirement strategies, please reach out.
