A lot of planning needs to go into retirement. It’s a major life event, so it needs to be done with care — not on a whim. Your retirement preparation checklist should include having critical conversations with others who will be involved in your planning and affected by your retirement.
“Before you retire, get on the same page with the important people in your life about what this important life change means to you,” said Carla Dearing, CEO of online financial planning service SUM180. Some of these money conversations might be tough. But having them will make for an easier transition and help you avoid financial missteps, Dearing said.
Keep reading to find out how to talk about heavy situations in retirement, what to say and how to make them less awkward.
Talk to an Advisor About Whether You Can Afford to Retire
Before you retire, you need to figure out whether you can afford to stop working. “Many people get to the age they have picked for retirement and just proceed to notify their employer and proceed right along,” said Byrke Sestok, president of Rightirement Wealth Partners in White Plains, N.Y. Having a conversation with a financial planner can help you determine if you can retire.
You could even work with a planner who charges by the hour — such as one with the Garrett Planning Network. At the least, have an honest conversation with yourself about whether you can afford to retire.
Start by figuring your budget for an entire year, Sestok said. Then search online for free retirement calculators that can determine how long your money will last based on your expenses and sources of retirement income — such as savings and Social Security. It might be difficult to face the reality that you need to work longer, but it’s better than discovering in retirement that you can’t afford to get by, Sestok said.
Talk to Your Boss About When You'll Retire
It almost goes without saying that you’ll need to let your employer know that you plan to retire. “Don’t wing it” to prevent the conversation from becoming uncomfortable, said Fritz Gilbert, a corporate commodity trader who will be retiring this month.
For starters, don’t tell co-workers before you tell your boss about your plans. Schedule a time with your boss to have the discussion well before you plan to leave. During the conversation, state your preferred retirement date but consider being flexible if your boss has a major issue with the timing, said Gilbert, who is the creator of the Retirement Manifesto blog. “Reiterate that you’ll stay 100 percent committed to work and training your successor while you’re still employed,” he said.
Talk to Your Boss About Transitioning to a Consulting Relationship
Stepping away from work entirely might not be a good move for you financially or emotionally. So you might want to talk with your boss about continuing to work for your company as a consultant or freelancer rather than retiring altogether. “Chances are, you have experience and skills that will continue to be valuable to your employer, even when you are no longer on staff full-time,” Dearing said.
Before you have the conversation, research the fair fee rate for someone at your experience level to negotiate your future contract from a position of strength, she said. “Your track record as a reliable employee and the cost savings to your employer of no longer having you as full-time staff should also boost the argument in your favor,” Dearing said.
Talk to Your Significant Other About Downsizing Before Retirement
Your monthly budget will likely need to change in retirement once you no longer have a steady paycheck. So it’s important to get on the same page with your partner before you retire about the lifestyle you expect to have, Dearing said. In fact, you should talk about adjusting your lifestyle before retiring.
“Do yourselves a favor and take a gradual approach to downsizing your spending well before retirement,” Dearing said. “This will let you significantly cut your monthly expenses without feeling the shock of adjustment.” Look at your monthly expenses together and identify items you can do without, she said. You might even want to get rid of one of your cars or downsize to a smaller home.
“If you can agree on which trade-offs you are both willing to make, the impact on your security and comfort in retirement can be huge,” Dearing said.
Talk to Your Significant Other About What You'll Do in Retirement
Plenty of people retire without knowing what they’ll do once they’re no longer working. However, it’s important to talk to your spouse or partner so you’re on the same page and problems don’t arise. For example, if a husband is retiring and his wife hasn’t been working outside the home, it might create friction if he’s at home all of the time, said Charles Scott, president of Pelleton Capital Management in Scottsdale, Ariz. “The wife is now having her space invaded and that can make things really uncomfortable for both parties,” he said.
“Our advice is to plan out what you’re doing each day — morning, afternoon and evening,” Scott said. “Work has taken up a bunch of time and now it doesn’t. Plan out what to expect.”
Talk to Your Spouse About Where You Want to Live
If you’re thinking about relocating in retirement, this can be one of the tough money talks you’ll need to have with your spouse. “If your spouse wants to live on the beach, and you want to live in a cabin by the forest, then problems can arise,” said Ashley Foster, founder and CCO at Nxt:Gen Financial Planning.
To avoid arguments, start by talking to your spouse about the fun vacations you have taken together and what made those places special, Foster said. You also could pull out a map to plot possible retirement destinations. “This will help you and your spouse to begin to narrow down possible choices,” Foster said. “Then ask your adult children what they think about you moving to a new destination. Planning becomes more effective — and fun — when everyone is involved.”
Talk to Family About Your Upcoming Lifestyle Changes
The lifestyle changes you plan to make in retirement might affect your extended family. It’s important to talk to them about these changes before they happen to make it easier for your family to adjust, Dearing said.
For example, if you have hosted your family’s holiday celebrations, you might no longer be able to if you downsize to a smaller house in retirement. Discuss this with family before retiring so alternate plans can be made. Or if you plan to relocate or travel frequently, you might no longer be able to help with the grandkids. “Giving your kids and grandkids plenty of notice will help them plan ahead,” Dearing said.
Talk to Children About Closing the Bank of Mom and Dad
If you’ve been providing financial support for your adult kids, one of the tough money talks you need to have before retiring might be about cutting off that support. “As we approach retirement, we need to quantify how much help we would be willing to give our adult children,” said Benjamin Brandt, a certified financial planner in Bismarck, N.D., and host of Retirement Starts Today Radio.
Agree on an amount you’re willing to provide — if any. The key is to avoid becoming a bottomless financial safety net for your adult children, Brandt said. “You will both regret it if you go broke and have to move in with them,” he added.
Talk to Aging Parents About What Support You Can Provide
One of the most difficult money conversations you might need to have before retiring is with aging parents you’re helping out financially. Although you owe a debt of gratitude to your parents for raising you, “that gratitude shouldn’t be confused with an obligation of unlimited financial support in retirement,” Brandt said.
Once retired, you’ll be on a fixed income. So it’s important to let parents know if you have to dial back financial assistance for them. However, you can discuss ways that you can support them with your time rather than money.
Talk to Loved Ones About Your Long-Term Care
You might want to avoid talking about long-term care because the idea of needing someone else to help care for you isn’t a pleasant one. But there’s a good chance you’ll need care — considering that most Americans turning age 65 will need it at some point, according to the U.S. Department of Health and Human Services. If you don’t have a plan, long-term care costs could wreck your finances in retirement, Foster said.
“Discussing this topic may not only save your finances but provide your loved ones with an idea of what you would like to have happen should you or your spouse need care,” he said. In addition to talking with your children about what level of support they’re willing to provide, consider meeting with a financial planner to discuss how to fund long-term care. And meet with an attorney to draft an advance medical directive and power of attorney to designate someone to make healthcare and financial decisions for you if you are unable to yourself.
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About the Author
Cameron Huddleston is an award-winning journalist with more than 18 years of experience writing about personal finance. Her work has appeared in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, MSN, USA Today and many more print and online publications. She also is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.
U.S. News & World Report named her one of the top personal finance experts to follow on Twitter, and AOL Daily Finance named her one of the top 20 personal finance influencers to follow on Twitter. She has appeared on CNBC, CNN, MSNBC and “Fox & Friends” and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR, WTOP in Washington, D.C., KGO in San Francisco and other personal finance radio shows nationwide. She also has been interviewed and quoted as an expert in The New York Times, Chicago Tribune, Forbes, MarketWatch and more.
She has an MA in economic journalism from American University and BA in journalism and Russian studies from Washington & Lee University.