Preparing for Retirement: 5 Things to Consider

Apr 14, 2021 | Insights

The name Ida Mae Fuller is not one often found in the history books. But if there is a history of retirement programs ever written, it should be. Ms. Fuller was the first recipient of Social Security, the retirement program set up by the U.S. government under the Franklin Roosevelt administration. Ms. Fuller’s experience with Social Security is interesting. She contributed $22.54 to the program in the three years prior to her retirement in 1939 at age 65. She lived to be 100 and ended up collecting $22,889 from the program before she passed away in 1975. There are two takeaways from this. Even then, when life expectancies were shorter than they are now, retirement could last a long time. And, secondly, Social Security would eventually have trouble if everybody paid in less than 1/1000th of what they would eventually take from the program. By the time she retired, Ida Mae had already trounced the actuarial tables of the day which predicted that a woman born in 1875 would live to about age 40.

Today, a female turning 65 can expect to live 20.5 years more and a male turning 65 another 18 years more. Retirement can now take up 20%-25% of a person’s lifespan. To have a successful one takes thought and work that should begin well before it occurs.

Let us start with a question: When should you begin preparing for retirement?

a. At age 25?

b. At age 35?

c. At age 45?

d. At age 55?

e. At age 65?

The correct answer is at age 25, or even earlier if possible. The biggest reason for this is that the earlier you start preparing for retirement, the more likely it is that you will have the retirement you want. All things being equal, the earlier you start saving, the more funds you should accumulate by retirement age. In addition, good health habits (such as not smoking and keeping weight under control) can have enormous implications in your later years since health-care costs are generally a large, or the largest, use of retirement dollars. The list of things to contemplate in the years before retirement is long. We are addressing five we consider most important. There are numerous resources available to help people plan for retirement and we will cite several later.

1. Retirement Income

Throughout most of human history, there was no retirement. People worked until they died. “Retirement” as we think of it began after the industrial revolution as businesses and governments found that assembly lines slowed down as the workers on them aged. The practice of paying people to leave jobs began first in Germany but then spread across the industrialized world in different forms. In the United States, American Express was the first company to offer its employees a retirement plan, a practice that spread quickly among the nation’s largest employers. The Great Depression prompted the introduction of Social Security.

For most workers today, the days of defined benefit plans are over. Those plans, which provided lifetime income to workers in many industries were once the norm. They are now rare. In their place we have a world of defined contribution plans and personal savings. Plans such as 401ks and 403bs generally consist of a combination of employee savings “matched” at some level by an employer contribution. These are the foundation of most retirement plans today. Close behind are IRAs, personal savings that could be made with either pre-tax or after-tax money, a fact that becomes important when they are used. Social security remains a key element in retirement income as well (and for too many people, the sole element). And, and hopefully not lastly, other elements of personal savings are important.

2. Health care costs

According to financial services giant Fidelity Investments, the average couple can expect to use more than $300,000 for health care items not covered by Medicare or other types of health insurance. This is a staggering sum and one that people seldom consider in pre-retirement years. Staying healthy as long as possible is one of the easiest ways to control this cost. Establishing a Health Savings Account (HSA) should be a key element in retirement planning, along with 401ks and IRA’s etc. HSA’s are, in some ways, the best savings vehicle going today in that money is not taxed on the way into the plans and does not have to be taxed on the way out of plans if some simple rules are followed as well.

3. Housing and location

Where to retire is a key element of retirement planning. Housing often represents one of a couple’s largest assets so deciding what to do with personal real estate can alter the future of that retirement significantly. Keeping the family home could be costly while downsizing could free up funds that could be used for other retirement needs. Moving to a less costly location is also a thing to consider. Of equal importance also is understanding the wildly different tax policies in our fifty United States. Moving to a tax friendly state may also free up significant dollars that could be used for other retirement needs.

4. Estate planning and legacy

By the time someone is in or nearing retirement, having a general estate plan is practically a given today. Having a will, power of attorney, and a health care power of attorney are essentials in today’s world. More complicated estate plans might also be appropriate. In an earlier primer, we have discussed various other estate planning things to consider. It may be found here.

5. Time management

Going from working full-time to retirement can be an incredible shock to an individual. Long before retirement actually starts, if possible, someone should be thinking of how he or she is going to transition from full-time employment to retirement, at once or over a period of time. Many people today opt for staged retirements. There are innumerable opportunities for today’s retirees to contribute to their communities through a variety of volunteer and charitable opportunities. So much so that it is not uncommon to hear from a retiree that he is busier now than when he was working.

Retirement Planning Primer


About Chase Investment Counsel

Chase Investment Counsel is a family and employee-owned boutique wealth management firm that offers personalized investment services. Our clients include career professionals, those nearing or in retirement, and families experiencing financial transitions such as generational wealth transfer, widowhood, divorce or sale of a business. Chase’s active, disciplined investment management team is focused on selecting individual stocks and bonds targeted to each investor’s specific financial goals and risk tolerance. Established in 1957 in Charlottesville, VA, Chase Investment Counsel manages approximately $300 million in assets.