Welcome! You are on this page because you are a nurse looking for retirement planning strategies and ways to improve your plan. If you took the Retirement Readiness Assessment and you learned you want more preparation, congratulations! I designed this page for you! If you haven’t taken the Retirement Readiness Assessment, take it soon to give you a baseline of your retirement planning. Either way, read on to learn more about retirement planning, your way.
Preparing for Retirement
Retirement planning is important for nurses because it helps to ensure financial security and peace of mind after leaving the career you worked hard to build. A healthy and well-balanced retirement plan considers income, risks and expenses, purpose, and socialization. There are many factors to consider when designing your retirement plan including creating a budget, savings, healthcare expenses, pension and retirement benefits, investment strategies, income replacement, longevity risk, optimizing social security benefits, estate planning, transitioning to retirement, and financial literacy and education. Let’s start with your budget.
Budget
A sound financial plan starts with a budget. Think of a budget like a care plan where you know the patient’s baseline and goals and you develop interventions to optimize the outcomes. A budget works the same way. A budget gives you a financial baseline, considers where you want to be, and guides your actions to achieve your outcomes, in this case, your retirement. Setting realistic goals is basic to a healthy budget. You can develop your budget with any tool. You can use a pencil and paper, an app, or a software program. Remember to start with your goals and estimate how much you will need to achieve them. Next, list all sources of current income. Sources of income include wages, salaries, tips, commissions, fees, interest, dividends, profits from business or rentals, and social security benefits. Next, list all your expenses. Review your checking, credit cards, and loan statements. If you pay cash or are unsure of your spending, consider saving every receipt and review them for a month to get a better idea. When you have listed your income and expenses, total each column. Then subtract the lower number from the higher number. Congratulations if your income is higher than your expenses. You can move on to the next part of your plan, savings. If your expenses are higher than your income, take steps to improve this to free up your money to move on to the next part of retirement planning, savings.
Savings and Retirement Investments
Retirement savings are important for financial security. Adequate savings help support your retirement lifestyle without having to reduce your standard of living.
Saving money can be challenging, especially at first. Planning for retirement often comes later in a career. And many people believe social security will be their only source of retirement income. But Social Security was designed to only help in retirement. Depending on your standard of living, you may need savings to supplement your Social Security benefits. When planning for retirement, consider opening at least two accounts. First, consider opening an emergency savings account. Plan to save anywhere from 3 to 6 months of living expenses. And plan to use your emergency savings only for unexpected events like a car or roof repair. A retirement plan is the other important account to open. Consider enrolling in your employer-sponsored retirement plan. Ask your Human Resources department if the plan offers matching funds. If your employer doesn’t offer one, consider opening your own individual retirement account (IRA). The importance of saving is to start. Like any new habit, give yourself time to adjust. Once your budget is complete and you have extra money, consider saving it, regardless of the amount. Also, the amount you can save may vary depending on the events in your life and it is important to stay flexible with your savings plan. Just keep saving something to stay in the habit. There are many savings accounts to pick from. Talk to your bank about the best one for you. Ask about accounts that earn interest. If you want to know an estimate of how much you need to save for retirement, consider using a calculator. Next, let’s look at healthcare expenses as part of your retirement planning.
Healthcare Expenses
Nurses know that medical advances and healthy lifestyles lead to longer lives. We also know that chronic diseases are normal with aging. But have you stopped to consider how much even one chronic illness will add to your healthcare expenses in retirement? Having a sound financial plan that includes covering healthcare expenses in retirement can help reduce stress and increase peace of mind. Nurses know prevention is cheaper than treatment. With that, self-care may help reduce some healthcare expenses in retirement. And while self-care is one part of managing a chronic illness, you will want to consider other costs associated with your condition such as medications, supplies, and insurance deductibles and co-pays. Medicare will be available to you at age 65 or sooner depending on your health. But Medicare costs money and has coverage limits. And depending on your health, you may need to consider other plans that Medicare doesn’t cover like a supplement, or vision and dental insurance. Anticipating your healthcare needs and expenses is important to designing a sound retirement plan. Next, you want to understand strategies that aim to optimize your pension and retirement benefits.
Pension and Retirement Benefits
Pension and retirement benefits are a significant source of income. It is important to understand your pension and benefits plan if your goal is to optimize your income in retirement. Many employers offer a retirement fund like a pension or a defined contribution plan. Pensions, also called defined benefit plans, are accounts the employer establishes and sets aside money for you to collect at retirement, usually monthly. A defined contribution plan is an account where you contribute a percentage or fixed amount towards your retirement. Defined contribution plans are more common than pension plans. There are many benefits to taking part in a defined contribution plan. One benefit is the plan allows you to save for retirement with pre-tax dollars. Another benefit is your money grows tax deferred. This means you pay taxes when you withdraw the money, usually in retirement when your income is expected to be lower. The other benefit is if your employer matches your contributions. Under the Internal Revenue Service (IRS) code, employers can match your contribution with a certain percentage or dollar amount. Participation is voluntary but some employers automatically enroll employees into the plan. You can ask to be removed if you are not interested. Talk with your Human Resources department to learn about the retirement plans available to you. Also, review the plan’s rules carefully and find out when you can withdraw the money with and without penalties. Your Human Resources department can also let you know the amount your employer contributes and when the matching will begin. Keep in mind, the IRS regulates defined contribution plans, and you will want to know any tax penalties for early withdrawal. A pension and defined contribution plan are great income streams in retirement. Learn all you can about your employee benefits, especially retirement plans that focus on optimizing your income streams. Next, let’s look at ways to potentially grow your money for retirement with investment strategies.
Investment Strategies
Sound investment strategies aim to generate income, protect your money, and manage risk. It is important for your investment strategies to be suitable to your risk tolerance and financial goals, especially in your retirement years. Wise investing can help grow your money for retirement. Keep in mind it is important to have income to invest. In other words, avoid taking out a loan or cashing in a life insurance policy for investing. Also, if the latest investment sounds too good to be true, it probably is. Speak with a professional to guide your investment decisions. Finally, a sound portfolio generally has a mix of stocks and bonds and other investments. Stocks and bonds typically work opposite each other. And diversifying your risk across many different investment vehicles can help you navigate changes in the economy. Keep in mind that all investing involves risk, and the use of asset allocation or diversification does not assure a profit or guarantee against a loss. The next part of your retirement plan is considering income replacement.
Income Replacement
Depending on the age you retire, your retirement may last up to 40 years or more. Planning income for many years in retirement is important to meet your expenses without reducing your standard of living or becoming dependent on others. To consider the amount of income you will need in retirement, complete a budget you can live on. Consider all expenses in retirement. Expenses in retirement may differ from current ones. For example, your house payment, student loans, or childrearing expenses may be gone. You may have other costs such as healthcare expenses. And consider budgeting for activities like travel or hobbies. Once you estimate your expenses, evaluate your income streams. Include sources like Social Security, your retirement account, or annuities. It is also important to know how long you will be in retirement to help ensure you have enough money. It is common for retirees to return to work to supplement their income if they underestimate their income needs. An important part of your retirement plan is making sure you have adequate income in retirement to continue living the lifestyle of your choice. Next let’s look at a common concern among retirees, longevity risk.
Longevity Risk
Longevity risk is the concern of outliving your retirement income and savings. Longevity risk is a common concern. A sound retirement plan can help ensure you have enough money to keep your standard of living throughout your retirement. Your retirement plan should include the estimated date you plan to retire and the time you will be in retirement. It is impossible to know how long you will live. But you can use a longevity tool to give you a rough estimate. Depending on your health habits and genetics, you may need to consider a retirement time horizon until age 90 or 95 (AARP, June 9, 2022). A sound retirement plan includes knowing how long you estimate your retirement will last. From there you can use a budgeting tool to estimate the amount of money you will need in retirement. Next, let’s look at a common source of retirement income, Social Security.
Optimizing Social Security Benefits
Social Security benefits are a source of retirement income for many. Optimizing your Social Security benefits can add up to 8% a year to your retirement income, if you postpone filing for benefits. Understanding Social Security benefits and when to claim them is important for your retirement planning strategies. There are many eligibility factors to consider when claiming Social Security. For example, the amount you receive is based on the age you retire and how much you paid into the system. Other eligibility factors include disability, divorce, and survivor benefits. A great way to learn about your benefits is to create an online account on the Social Security website. Once you create your account, you can view your statements, use personalized tools, and apply for benefits. If you prefer to wait to create an account, ssa.gov is a great place to learn about Social Security and Medicare benefits. Knowing the Social Security benefits available to you and periodically reviewing your statements will keep you informed through retirement. We have covered a great deal of a sound retirement plan. Let’s discuss your legacy and estate planning.
Estate Planning
Estate planning is the orderly distribution of your assets after you pass away. Estate planning gives you control over your assets to help ensure your wishes are respected. Proper estate planning also helps lessen added stress for your loved ones. Estate planning includes creating important documents such as a will, power of attorney, or trust accounts. Estate planning involves legal and tax advice, and you want to consider speaking with the proper professionals to guide you. Next, let’s discuss the importance of financial literacy and education when planning for retirement.
Financial Literacy and Education
Many nurses are not interested in financial topics or may not know where to start their education. Financial education helps you make informed decisions that will impact your retirement. Financial education also gives you better control and confidence in knowing your retirement plan is right for you. Hiring a professional is important to help you prepare for retirement but equally important is to stay informed. Read as much as you can about important retirement topics. Stay informed on income streams such as Social Security and your retirement accounts. Most importantly, ask lots of questions and seek clarification for any terms or concepts you do not understand. Reading the financial blog will also help you stay informed. Finally, let’s talk about the importance of a non-financial part of retirement, the transition.
Transitioning to Retirement
The transition from a nursing career to retirement is an important lifestyle change that involves emotional and sometimes physical adjustments. Properly preparing for this life-changing event helps you manage the uncertainty that comes with any new change, even a planned one like retirement. Besides planning to have enough money in retirement, consider how you will spend your time and how your socialization needs will be met. Some do well with their newfound free time and others get bored easily. Do you plan to travel, start a hobby, or volunteer? Maybe you plan to go back to school or work part-time. Retirement is about closing one chapter and opening another. Preparing in advance how you will spend your time and who you will spend it with are important parts of a healthy retirement plan. And remember to give yourself time to adjust to your new lifestyle. Set realistic expectations for your time. Nursing is a fast-paced job. Allow yourself time to adjust while you let go of old routines and begin new ones.
Conclusion
Living the lifestyle of your choice in retirement begins with a sound plan. Beginning your plan as early as possible will help optimize your chance of achieving your retirement goals. There are many parts to a retirement plan, and it is easy to feel overwhelmed, especially in the beginning. By reading this page, you’ve already begun! Congratulations! As your plan develops, take the Retirement Readiness Assessment often to measure your progress.
Best of luck,
Georgene*
Have a question or need help with your retirement planning? Contact me.
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