5 Retirement Questions Everyone Must Answer

by Glenn Curtis for Investopedia, A Forbes Digital Company

Retirement provides a chance to enjoy the fruits of one’s labor. However, a pleasurable retirement requires proactive and thorough planning. With this in mind, we’re going to go through five retirement questions that every person should ask themselves as they approach retirement. Answering these questions for yourself should help guide your ongoing retirement plans.

1.  What’s the grand plan?
Some people dream of buying a boat and sailing the high seas when they retire, while others are content spending their days on the golf course. Still others want to travel the world. But before you get too far ahead of yourself in thinking about how you will save for retirement, you need a goal. Therefore, it’s crucial to first decide what you’ll want to do in retirement. Once you know what your dream is, then you can begin making it happen.

For example, if your dream is to wake up in the morning and play golf all day, it makes sense to determine what it entails to join a club (some require substantial up-front fees), and whether the area you live in – or want to live in – has adequate courses.

Similarly, if your dream is to travel the world, you are going to want to live in close proximity to an airport (or seaport if you prefer to cruise). You’ll also want to make sure that there are no other obstacles that will affect your plans. By deciding what your dream retirement would look like, you can shape the rest of your plans to make it work.(For further reading, check out Life After Retirement.)

2.  Do you have the cash?
It’s great to have goals, dreams and ambitions. But frankly, they don’t mean a thing if you don’t have the financial means to fulfill them. Rather than living on hope, it’s best to do some real soul searching to determine what your future expenses will be, and whether you will have enough money to live comfortably and to actually enjoy your retirement years.

Financial planners have been arguing for decades over how much money the average person or couple needs upon retirement. Some say that in order to maintain your lifestyle, you’ll need 60-80% of your pre-retirement income annually.

However, many of those estimates are just that – estimates.


The point is, if your goal is to travel the world upon retirement, do some research. Figure out how much it will cost, and then make sure that you’ll have enough money to live your dreams – and pay your bills – for the rest of your life. It’s possible that you may need to change your goals or cut back on your expenses in other areas to make it work. (For a good place to begin, see Fundamentals Of A Successful Savings Plan and Determining Your Post-Work Income.)


3.  Should you move?
When people are young and employed they tend to live in more urban areas. However, it is often prohibitively expensive for seniors to live in, or on the outskirts of, major metropolitan cities. Therefore, people that are expecting to retire within the next few years should consider making a move to a more affordable location. There are many choices out there, but how does can you evaluate all of the possibilities?

There are a number of factors that should be considered when picking a new place to live. For example:

  • Proximity to family members
  • The cost of housing
  • Access to healthcare facilities
  • Access to entertainment (such as shows and sporting events)
  • Proximity to a major airport
  • Year-round weather conditions
  • Taxes (state income, property and estate tax)

It is almost impossible to find a location that fits every need; therefore, the best strategy is to settle on an area that meets the bulk of your needs, particularly those related to long-term health and well-being. For example, although cold weather might not bother you now, when you are 85, it could have a debilitating effect on your body. If you think this will be the case for you, you might want to consider joining the flock and moving to a warmer climate, even if it doesn’t address some of the other factors mentioned above.

4.  When should you sell your home?
Most retirement planners focus on the individual’s investment portfolio. The portfolio is important, but it’s often not the average person’s most valuable asset or largest potential source of liquidity. For many people, the bulk of their wealth is tied up in their homes.

As people approach retirement age, they should consider selling their existing homes, particularly if the mortgage has been satisfied and the property has increased significantly in value. (For further insight, see Need Retirement Income? Sell Your House! and Downsize Your Home To Downsize Expenses.)

Why sell?

First of all, you’ll generally need less space and a smaller home is easier to maintain. However, that’s not the primary reason. The main reason to sell is to gain liquidity and to make sure that you have enough cash to live on and establish an emergency fund. After all, what good does sitting on a $1 million home do if you don’t have the money to buy adequate health insurance or do the things you enjoy?

Ideally, people approaching retirement should try to “game” the real estate market. That is, they should try to figure out if it makes sense to sell the family home now and rent a home for a couple of years until retiring, or if it makes sense to hold onto the home until the date of actual retirement.

The decision can be crucial. Just think about what happened to those who waited to sell their homes until after the housing bubble burst in the late 1980s!

So, what is the best way to go about “gaming the market?”

Very simply, pay close attention to trends in your region by reading the local newspapers, perusing neighborhoods for open houses and inquiring with a local real estate agent as to whether home prices are rising or declining.

Example – The Importance of Reading the Real Estate Market

Suppose that you are 10 years from retirement and the real estate market is currently running hot. You secure an extra $100,000 from the sale of your home, thanks to favorable market timing. You then invest that money in a vehicle that yields an 8% return per year – over a 10-year period it will grow into more than $215,000. That is a lot of money! (To learn more, see Compound Your Way To Retirement.)

However, before you get too excited, remember you’ll also need to subtract the cost of renting an apartment for those 10 years. Let’s say your new rent is $1,000 per month (not cheap, but certainly nothing extravagant). Over a 10-year span this will add up to $120,000.

$215,000 – $120,000 = $95,000 net gain from selling into a hot market.


Again, doing your homework in advance is well worth it.

5.  Have you made an estate plan?
In order to ensure that your assets are properly transferred to your heirs, and in order to minimize estate taxes, it makes sense to do some estate planning. As unpleasant (and dull) as the thought might be, it’s important to sit down with your attorney and accountant to determine the most cost effective way to transfer your estate to your heirs upon your death. This might entail setting up a trust, will and/or custodial accounts for children or grandchildren.

It is important to consider estate planning now, because there is a three-year “look back” with regard to assets previously removed from your estate. In other words, if you have a trust buy a life insurance policy on your life and then you die within a three-year period after the contract was signed, the amount of the insurance could be included in your estate for estate tax purposes.

Advanced planning is the key to estate planning and, if you think about it, your overall happiness in retirement. (For more, read Getting Started On Your Estate Plan.)

Bottom Line
If you are in the home stretch, don’t hold back now. Retirement planning can be overwhelming at first, but if you can answer these five questions, you’re well on your way to generating a solid retirement plan. You’ll be happy you did!

by Glenn Curtis

Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.