So, you’re wondering why retirement planning is important? In the last couple of years, I wrote over 100+ articles about retirement on this website. For this article, I combined my research and knowledge and created a top 10 list of the most important reasons for retirement planning. Let’s find out more!
Just a heads up, this post contains some affiliate links. As an Amazon Associate I earn from qualifying purchases. Purchases you make through these links may earn us a small commission, at no extra cost to you.
1) To Complete Your Bucket List
Retirement is a time where you can do all the things you want. And there’s the catch. Most people don’t know what they want to do once they’re retired. That’s why it is important to start planning for your retirement. If you know what you want to get out of it, you can start preparing for it.
People often say that it is the most important thing to know your financial situation when planning for retirement. Of course, knowing your financial situation is essential to get the most out of your retirement, but I’ll discuss this later. Because from what I’ve learned since researching retirement if you don’t know what you want to do, where is the fun?
So, I always recommend pre-retirees or people who just got retired to create a retirement bucket list. The idea is simple. You create a list of all the things you want to do when you retired. There’s only one rule, don’t limit yourself. People often limit themselves, like ‘I really can’t afford that trip I always wanted to make.’ However, when creating your retirement bucket list, you want to create a list of all your dreams you want to fulfill. You can always decide later if there are things on that list that maybe have to wait a while before completing it.
When you’re married or living together as a couple, you both want to make a retirement bucket list. This exercise is great fun. First, create an individual list, and then later combine the two lists. Creating a bucket list this way results in a list of things to do in retirement that reach fulfillment for both of you.
Sometimes it can be challenging to create a bucket list. I’ll answer why that is in the next part of this article. However, when you’re looking for inspirational ideas for your bucket list, make sure to read my article 430 Ideas For Your Retirement Bucket List
2) To Prepare For A Lifestyle Change
Retirement changes your life, and you need to prepare for it. That’s why planning for retirement is critical. Whether you can decide on your own retirement date or are forced into retirement, you need to have an idea of the things you want to do when retired.
Let me explain why this is important by describing two situations that occurred in my family.
One of my aunts got forced into retirement at 55 after the company she worked for started reorganizing. She did get great financial compensation; she kept a large part of her salary until her retirement age. So, she was lucky when it comes to her financial situation. But the first years she didn’t find happiness.
She loved her job and didn’t plan for activities in retirement. The lifestyle change came unexpected, and because she worked for so many years, she didn’t know what she could do with her time. She picked up some fun activities like traveling and volunteering, but until today she’s still struggling with finding fun things today. And all of that because she didn’t prepare for the lifestyle change that retirement is.
How different is that when we look at my dad’s situation? He was an accountant for many years and worked until his late fifties. He decided on his own retirement date and was lucky enough he had the financial resources to do so. But he also planned for activities in his retirement.
My dad loves to travel, so he traveled to many parts of the world, and we joined him as a family more than once. But he also loves to be active in our garden, an activity with many benefits for retirees, as you can read in this article.
One of the things my dad loves to do most is to work as a mechanic. It was always one of his favorite hobbies, and since he was a child, he was interested in cars. So, the day he retired, he walked into a car repair shop close to his former office and asked the mechanics if he could start as a learning mechanic on a volunteering basis. And since that day, he’s working at that repair shop for one day a week.
Do you see how two situations can be completely different when planning for retirement and preparing for the lifestyle change retirement is? I wrote this article on How To Mentally Prepare For Retirement: 21 Tips, where you’ll find some helpful tips.
3) To Know Your Financial Situation
Knowing your financial situation is key when planning for retirement, but it’s not the most important thing when planning for retirement.
I always like to think of possibilities first. That’s why I recommend you first think about what you want to get out of your retirement before starting to look at your financial situation. This way, you can work towards your goals instead of limiting yourself because you don’t have the financial resources.
Make sure to talk to a financial professional. Maybe your accountant or tax advisor. It’s important to know what you can financially expect when retired, how to invest and save enough money for retirement. Financial professionals can help you to make the best financial choices. One of the easiest ways to get in contact with a financial expert is by using the platform Just Answer. You’ll ask your answer, and the platform connects you with the best available expert. Find out more here!
4) To Find Happiness In Retirement
Many retirees struggle to find happiness after retirement. The main reason is that they don’t have a retirement plan. Having a retirement plan prepares you for the big upcoming lifestyle change, as we discussed earlier in this article.
However, many people aren’t aware that they often need to re-identify themselves with their new lifestyle when they retire. Every retiree needs to get to a process known as the stages of retirement. These stages describe the emotional state of a retiree during the first period of retirement.
The final stage of these stages is where you are truly in sync with yourself and your lifestyle as a retiree. You’ve found happiness in retirement.
When you don’t have a plan of how you’re retirement should look like, you’ll probably have a hard time going through these stages of retirement. That’s why retirement planning is important. It helps you to transition from a career-focused lifestyle to a retirement-focused lifestyle.
When you’re getting retired, a lot will change. Many people have to create a new social circle because their social activities were work-related. Retirees also struggle to create a daily schedule because they don’t need to go to work anymore. I won’t say planning for retirement will solve all this for you, but it helps you make things easier.
In my book 5 Steps To Happiness In Retirement, I combined my research and created a fast track to happiness for retirement. Learn more about my book here.
5) Because of Higher Life Expectancies
Life expectancy continues to grow all over the world. According to the CDC, people in the United States have an average life expectancy of 78.7.
Men live on average shorter than women. The data shows that, on average, men have a life expectancy of 76.2 and women of 81.2
The interesting part of this data is that when we zoom in on US citizens at the current age of 65, their life expectancy increases. They are expected to live for another 19.5 years on average. Meaning the average age will be 84 years old.
There are many more factors to consider when predicting your life expectancy, but it is important to know that we all get older than we’ve ever been. When you’re planning for retirement financially, you want to know how many years you need to cover financially.
An easy and straightforward way to secure yourself of future income is to save some extra money during retirement. When you’re using the platform AgeUp, you can set aside the equivalent of one dinner a month and secure yourself a guaranteed income when you get older. Learn more about AgeUp here.
6) Prepare For Unexpected Life Events
Anything can happen during life. You can plan all you want, but your life will take a turn when something unexpected is happening. You don’t want to prepare for the worst thing that could happen because that’s probably not making you happy.
However, it’s good to know your situation when the worst is happening—both financially and how you want to spend your life actively.
Earlier I told you about my aunt, who got forced into retirement at an early age. This was an unexpected life event for her, and because she never planned anything for retirement, she struggles until today with finding true happiness in retirement.
You don’t have to plan everything in detail, but having a plan helps you prepare for the unexpected things in life.
7) To See The Big Picture
Planning for retirement helps you to oversee the big picture of what you want to achieve. When you create your retirement bucket list and make a list of all the things you want to do as a retiree, you also learn what you’ll need financially to complete these wishes.
It gives you a goal to work towards so that you can create the retirement lifestyle you’ve always dreamed of.
Knowing what you want to achieve helps you make difficult life decisions. You can create a strategy that helps you and maybe your family getting closer to your goals.
8) To Avoid Unnecessary Stress
Avoiding stress is important for our health. We all know that, but still, we aren’t very good at avoiding stress. So when you’re planning for retirement, you can get at least cross off one stress factor from your list.
Creating a retirement plan where you first look at the lifestyle you want in retirement and then at the financial part of this lifestyle helps you avoid stress. Many people stress about their financial situation. According to the American Psychological Association, 72% of Americans reported that they’re are stressed about money or their financial situation at least once a month.
So, why do you want to avoid stressing about your (financial) retirement? Because it helps you to be happier. And not to sound negative here, but let’s look at the CDC’s life expectancy data again and zoom in at death causes. We see that heart disease is the #1 cause of death among US citizens. Many factors are related to heart disease, but as you can read on WebMD, hypertension is a major factor in heart-related illnesses. And there we have it; stress is a well-known cause of hypertension.
So, planning for your retirement is a way to avoid unnecessary stress about your retirement.
9) To Enjoy Retirement With Your Spouse
When your happily married, you want to enjoy retirement happily with your spouse. And to achieve that, it is essential to plan for retirement together.
Many factors determine how you spend your retirement together. Planning for your retirement helps you to create a plan where you can both express your wishes for the lifestyle change retirement is.
When you’re planning for retirement as a couple, you should consider several things. I wrote an extensive article where I share all the important steps for retirement planning for couples. The retirement planning guide for couples consists out of 12 steps, which are;
- Communicate your desired plans
- Discuss housing
- Organize (health) care
- Estimate your life expectancy
- Calculate your retirement budget
- Save for retirement
- Strategize your social security
- Up-date your finances regularly
- Stay updated about financial news
- Keep track of your finances
- Decide to retire together or separately
- Plan retirement dates
I explain these steps in detail in the article; 12 Steps: Retirement Planning Guide for Married Couples
10) Because You Can’t Work Forever
It’s just as simple as that. We can’t work forever. Of course, we all know the stories of people who work until their late eighties or even never retire. But the majority of people retire at some point in life.
There’s a difference between retirement when you stop working and have a plan for your retirement lifestyle and people who retire and don’t have a plan. Let’s discuss the people living in the Blue Zones to clarify this example.
The world’s Blue Zones are areas in the world where the most centenarians live. People who live to a healthy age much longer than average. Across the world, there are several areas known as Blue Zones, and the exciting thing is that the lifestyle of these people is similar. Besides healthy eating, they also stay active until a late age. Meaning, when they stop working, they’ll find other things in life that get them fulfillment.
Retirement doesn’t mean your life stops. It means a new chapter in your life is starting, and that’s why retirement planning is important. When you prepare for this time in your life, it’s easier to get fulfillment and find happiness in retirement.