Things to Consider Before Retiring with Drew Jones

April 24, 2023

Things to Consider Before Retiring with Drew Jones

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Things to Consider Before Retiring with Drew Jones Show Notes

When discussing things to consider before retiring, many people immediately start to think about things related to their finances. And with good reason. There are several things that need to be considered to ensure that your financial life is in order heading into retirement. But retirement isn’t all about money. What about your goals? If you’re married, what’s your spouse’s plan for retirement?

As Dean Barber and Drew Jones review things to consider before retiring on The Guided Retirement Show, one of the main things they’ll discuss is determining what you want your lifestyle to look like in retirement. Pay close attention to what Dean and Drew have to say so that you can define your retirement lifestyle prior to retirement and build a financial plan around that desired lifestyle.

In this podcast interview, you’ll learn:

  • Why you need to mentally prepare for retirement.
  • Your retirement is unique to you, but it isn’t solely about you.
  • Time and health are some of our biggest assets.
  • What to consider with a budget and balance sheet in retirement.
  • To think about how much you’re saving and where you’re saving to.

Defining Retirement

Before we dive right into things to consider before retiring, let’s think about what retirement means. For some people, the transition from working to retirement is simple. But there are some people who feel lost with trying to figure out what to do in retirement.

The retirement process for your friends and family members make look similar to your retirement process in some aspects, but it won’t be a carbon copy. Your retirement is going to be unique to you, so some of the things you need to consider before retiring are going to be unique to you as well.

“As we’re in our working years and we’re raising our families, we’re just kind of living day to day. We’re not thinking about retirement. So, when people get to retirement, what we see a lot of times is that people don’t know what they want their retirement to look like. What’s important to them? What’s the timing and the cost of those things?” – Drew Jones

Achieving Financial Independence

Whenever Dean is asked to define retirement, he thinks of it as achieving financial independence. There needs to be something that you wake up and do each day that gives your life meaning. When you retire, that means that you have enough money to not work.

The way Dean sees it is that if you have enough money to not work and you can get up every day and do what you want to do because it’s what you want to do and it’s not for a paycheck, it doesn’t matter if you’re still working because you’re financially independent. If you’re still working, it’s because you enjoy your job.

“What if you can start thinking in that fashion at a younger age—like your late 40s or early 50s—about when you can get to a point where work becomes optional? If it’s something you’re enjoying, great. If it’s not, why not go pursue something else?” – Dean Barber

What Are You Retiring to?

A lot of people also have the mindset that they’re retiring from something rather than what they’re retiring to. Once you think of it that way, it helps you get a clearer picture of things to consider before retiring and how to attain your desired retirement lifestyle.

There’s one other thing that can help a lot with getting a clearer picture of your retirement. That’s simply to start planning for retirement sooner rather than later. There are a lot of people who come to us for assistance with retirement planning when they’re only one to two years away from retirement.

How Early to You Need to Start Planning for Retirement?

We recommended starting a conversation with a CFP® Professional closer to 10 years before you want to retire. After all, there are a lot of things to consider before retiring that we’re about to go over, and many of those things take some time. It’s five to 10 years from retirement when you really can start to shape what you want the rest of your life to look like.

Most people get uber focused in that last five to 10 years before retirement and they put blinders on. They want to pay down their debt as fast as they can and save as much money as fast as they can. They think their life is going to be miserable during that time because they’re not going to spend one dime that they don’t need to spend. Dean can sum up his thoughts into three words about that approach—don’t do that. We’ll share his reasoning as well.

“Figure out what you need and set those objectives, but don’t forgo life during that time just because you think you need to save X-amount and that debt needs to be paid off.” – Dean Barber

In fact, there have been quite a few occasions when Dean and Drew have met with someone for the first time and they’ve achieved financial independence without realizing it. That’s what the clarity of a financial plan and working with a CFP® Professional can provide.

Mentally Preparing for Retirement

While people are oftentimes shocked when they’re told they can retire sooner than they expected, they still need to mentally prepare for retirement. It might sound obvious, but that mental preparation for retirement is one of the most important things to consider before retiring.

That’s why when we take someone through our Guided Retirement System, one of the first steps in walking them through a prioritization exercise. We talk about what the most important things are to you and your spouse and figuring out what you want the rest of your life to look like. It’s one thing to identify those things that are important to you, but have you mentally prepared for what that’s going to look like?

Retirement Is Something That You Can Practice

If you don’t feel like you’re quite ready to stop working but have done the necessary saving to position yourself to retire, that doesn’t need to stop you from starting to live the way you want to live in retirement.

Start those vacations early. Lump together some of your time off and start to do the things that you think you want to do. It’s almost like practice for retirement. What’s this going to feel like? Is this really what you’re going to enjoy doing? Start doing the things you want to do and do it with confidence. Once you get to the psychological side of retirement, you can start to dig into all the technical things about retirement.” – Dean Barber

When our CFP® Professionals take you through the prioritization exercise, they won’t even bring up money. They want to learn about what’s important to you and what you want the rest of your life to look like first and foremost. That needs to be discussed before talking about having the resources to do what you want to do. Most people think that’s backward since society trains people to think that way, but that’s not our approach.

Think about it this way. How do you know you have enough to retire if you don’t know what you want your life to look life? Going through the prioritization exercise marries your money with your life.

The Difference Between a CFP® Professional and Financial Salesperson

Unfortunately, a large portion of the financial services industry consists of financial salespeople. In many instances, they’ll just be concerned about making a commission and won’t have much interest in your retirement goals. CFP® Professionals on the other hand have made a commitment to be fiduciaries. That means that they put their clients’ interests first.

Dean asked Drew a simple question to help highlight why it’s so important to work with a CFP® Professional.

Dean: When you’ve taken someone through a prioritization exercise, how many people have said that the most important thing to them is their money?

Drew: Nobody.

One of the most important things to consider before retirement is that how much you have is never the most important thing.

There are so many other things that are more important than how big your portfolio is. Your investments are the how. They’re the engine that allow you to do the things that you want to do. That’s why we want to start talking to people five to 10 years before retirement. We’ve watched hundreds of people transition from work to retirement, so know the drill and how difficult it can be.” – Dean Barber

Another Way of Looking at Financial Independence

As we continue discussing things to consider before retiring, it’s important to realize that financial independence (or independence in general) is something that we chase for a long, long time. During your childhood, you can’t wait to get out of the house and go to college because you’re going to have freedom away from your parents. But freedom is one of the last things you have in college. To succeed in college, you need to go to class and study. You might have a part-time job or have practice if you’re an athlete or rehearsal if you’re involved with music, theater, etc. It’s hard to have much freedom in college and you’re likely still dependent on your family to pay for school and other things.

Then, once you graduate from college, you might think you’re getting closer to being independent with starting your career. But you’re not going to be a CEO or owner of a company on Day 1 of your first job. You’ll have a boss and need to report to someone. And you’re working for that paycheck to provide for you and your family throughout your career. So, that feeling of independence isn’t fully achieved until you have enough to do what you want to do.

Time Is Our Greatest Asset

By the time you reach your late 50s or early 60s, your identity is usually tied to what you do for a living. It takes time to rediscover who you are and what’s really important to you.

“One of our most valuable assets is one that you can’t see. It’s not an IRA, Roth IRA, 401(k), or any savings account. It’s time. That’s the highest-valued asset that we have. We need to fulfill it by doing those things by making the best use of the limited time we have. It’s a precious commodity. Once you flip that switch in your mind and look at it that way, it helps put things in perspective.” – Drew Jones

Health Is the New Wealth

While time is our greatest asset, we can confidently say that health is high up on the list as well. Good health typically results in more time. Health is another thing to consider before retirement because it can also correlate with work, as they stress of work can deteriorate one’s health.

“You need to make a conscious effort by your late 40s or early 50s to watch what you eat, exercise enough, drink enough water, and have regular checkups with your doctor. You need to pay attention to your health. I’ve seen far too many times where someone works and works, they finally retire, and they die two years later.” – Dean Barber

The same principle applies with having a stroke, becoming disabled, and not being able to do what you want to do in retirement. That can be prevented by paying attention to your health and realizing when you can stop working. That’s why you need to start working with a CFP® Professional well before retirement to receive clarity on when you can comfortably retire.

“There are people walking around with T-shirts that say, ‘Health is the new wealth.’ It’s correct. People are busy in life and are sacrificing during their careers. All those things that people should be doing like exercising and eating right that will help with having a more enjoyable retirement get put on the backburner. If people don’t do those things, that can be a prohibitor of doing the things you want to do in retirement.” – Drew Jones

Dean’s good friend, Ken Osiwala, told him that true wealth is defined by things that money can’t buy and that death can’t take away. That makes a lot of sense to Dean and Drew, and we hope it does to you as well.

A List of Things to Consider Before Retiring

Now, that we’ve set the stage with thinking about what’s most important to you and other key items to the early stages of the retirement planning process, let’s review a list of things to consider before retiring that Dean and Drew put together.

1. Creating a Budget

Yes, we’re starting our list of things to consider before retiring with what a lot of people think of as a dirty word. Hear us out on this. By the time most people are in their mid 50s, they’re not budgeting anymore. The thought behind that usually stems from their kids being out of the house, knowing they have excess money, and still saving. But the thought of budgeting can ruffle some feathers.

Once you’ve gone through the prioritization exercise and have figured out what’s important to you and what you want to do, you need to put a price tag on it. That’s another way to say creating a budget. What’s it going to cost to do the things you want to do?

“Don’t think of it as limiting yourself. It’s more like your spending plan in retirement. Replace the ‘word budget’ with ‘spending plan.’ Where is your money going to go? That mindset could get people more excited about creating a budget.” – Dean Barber

Your Go-Go, Slow-Go, and No-Go Years

Keep in mind that your budget is going to change throughout retirement. How is that so? It’s because your life is inevitably going to change. When you’re build your spending plans, think of your retirement as being in three stages—your go-go, slow-go, and no-go years.

Your go-go years are the first 10 years or so of your retirement when you’re likely to be in the best health of your retirement. Maybe you’ll pay off your mortgage during that timeframe as well. Therefore, it makes sense to front load your spending during those years and do the things you want to do in retirement.

During your slow-go years, you will hopefully be in fairly good health, but might not have the energy to do things like traveling a lot. So, you might not need to spend as much.

And then you have your no-go years. These are your last few years where you need to budget for a long-term care stay, assisted living facility, etc.

Another Dirty Word: Inflation

Another thing to consider before retiring from a budgeting perspective is inflation. We just mentioned mortgages. That’s not going to inflate. On the other hand, you have things like health care costs that are going to inflate at a higher rate than consumer goods and services. We’ve seen what can over the past year and a half if the possibility for high inflationary isn’t factored someone’s plan. It isn’t pretty. Forward-looking planning can prevent a lot of that pain of inflation.

2. A Balance Sheet

Next up on our list of things to consider before retiring is a balance sheet. A lot of people think about balance sheets being more associated with businesses. But it’s always good to have some sort of history or tracking mechanism to tell you your net worth. If you look at your balance sheet, it’s the assets you own versus the debts you owe.

Assets can be any type of investment accounts like IRAs and 401(k)s, taxable savings accounts, and even your home. Your debts can include car payments, mortgage payments, and anything else you owe money on. Assets minus debts gives you your net worth. You don’t need to look at your balance sheet every day, but you want to at least look at it during semi-annual reviews.

“Over time, you want to track your net worth, knowing that whatever the market will do that given year will impact that. You’ll want to start to see a trend line to the northern quadrant.” – Drew Jones

3. Debt

Part of what we just discussed with balance sheets is worth its own spot on our list of things to consider before retiring. That’s debt. Should you carry debt into retirement or be debt-free? A lot of people think they have to be debt-free entering retirement, but it depends on what debt is. There’s good debt and bad debt.

A mortgage can be considered as good/OK debt depending on the rate, term, and if the payments fit the size of the house you acquired. Then, there’s debt that can be viewed as bad debt, such as significant credit card debt. Credit card debt is always bad unless you pay it off every month.

“Anyone who has a credit card and is carrying a balance on it is insane. That means that you’re buying things that you can’t afford. Don’t do that.” – Dean Barber

You Can Be Financially Independent with Good Debt

Dean recently met with a client of about eight years to go through his plan. He’s 60 and 65 is when he wants to retire, but Dean told him that he doesn’t need to work anymore. If he continues to work, he doesn’t need to save anymore. He’s reached the pinnacle of financial independence. He didn’t know what to do because he kind of enjoys what he’s doing right now. But he realized that he needed to start thinking harder about what he wants to do every day.

“He said that he thought he made a mistake because he was so focused with getting his house paid off. He did have a really good interest rate and wanted to get out of debt completely. So, I told him about good debt and bad debt and a personal example that I had of it. The office park that I own was really close to being paid off when COVID hit. Interest rates went down to next to nothing. I did a cash-out refinance and got as much money out of the property as I could at a 3% interest rate for 15 years because I know I can make a lot more than 3% a year on that money. That’s good debt.” – Dean Barber

4. Savings

Where do you save and how much do you need to save? Those are two of the biggest questions when it comes to things to consider before retiring. If you’re a high earner, maybe it makes sense to contribute to your traditional 401(k). If you don’t make as much, it may make sense to contribute to a Roth 401(k).

A Laundry List of Savings Questions Are Among the Things to Consider Before Retiring

Where are you going to save to outside of an employer plan? Are you going to save to a Roth IRA or a taxable account? The important thing here is to know that you should never put your money into anything until you know the tax consequences and rules of what happens when you take it out.

“You almost need to step into the future, which is a big part of financial planning, to create an income stream. With the way that you’re saving today, what is your income going to look like in the future? Where is it going to come from? How much are you going to lose to Uncle Sam? What if you saved to Roth versus traditional? How does that affect how you can spend in retirement? And how does it affect how much you lose to taxes each year?” – Dean Barber

What’s Your Probability of Success?

When going through the financial planning process, you can build in hypothetical situations, such as changing how you’re saving. When we’re running through this living, breathing plan that’s changing as we’re doing reviews with clients, we can see the impact of making those changes.

If we’re going to make any change, we want to know why we’re making that change. We want to make sure that when we’re making a change that it won’t make someone take steps backward in retirement and negatively impact their probability of success. That way we can validate the change and give you the confidence you need when deciding to make that change.

“When we’re talking about probability of success it all goes back to what we were saying earlier. What do you want your life to look like? Success means that you can fully fund that and never need to adjust your spending. If someone is at a 90% probability of success, we consider that to be very good. It means that 90% of the time, you can spend exactly how we’ve put the plan together without adjusting your spending. There’s a 10% that you may need to slightly adjust your spending at some point. It’s not a 10% chance of failure.” – Dean Barber

5. Health Care

Health care is a big one on the list of things to consider before retiring. There are a lot of people who think that they can’t retire until they get on to Medicare. But that’s a misconception and shouldn’t be assumed.

“There are so many people who just have 65 in their head as their retirement age. It almost always boils down to people not wanting to fathom paying for their own medical premium on certain policies. It makes you realize how subsidized the health care through your employer when comparing those prices to what you would pay as an individual.” – Drew Jones

A 60-year-old married couple is probably going to have premiums around $30,000 a year. There’s a lot of people in that situation that just assume they can’t afford that. Well, don’t just assume that you can’t. Build a plan to see what it looks like and validate it.

If you can afford it, you need to know that. If spending that $30,000 a year gives you five more years of freedom to begin to do the things that are important to you and doesn’t affect the long-term viability of all the other things you want to do, you’ve disproven that you need to wait until 65.

6. Emergency Funds

This one kind of ties in with savings, but emergency funds are next on our list of things to consider before retiring. People get in this mindset of saving as much as possible during their working years. You still need to save in retirement, but that doesn’t mean that your money needs come into your checking account and then putting it into another account. You save in retirement by not spending everything that your account earns. It’s important to know that there’s money you can get to in case there’s an emergency.

“If you’re in retirement and your assets are driving a big portion of the income, you should have about two years of what you need to spend from your assets in a super safe and liquid position. That way you’re never forced to sell something that you don’t want to sell.” – Dean Barber

7. Life Insurance

Our next two points on our list of things to consider before retiring are also kind of tied together. We’ll start with life insurance. A lot of people will let their life insurance policies just go away as they enter retirement. Here is how Dean sees a lot of people think about it.

“If I can’t work, I need to provide income for my surviving spouse, children, etc. Once I reach financial independence, what happens when I die? I have all these resources and they’re going to continue, so why do I need life insurance. Well, there may be a reason to have life insurance.” – Dean Barber

Reasons to Keep Life Insurance in Retirement

So, what are those reasons? It could be used to pay funeral expenses. Or it could be used to pay an outstanding mortgage. But whenever we take people through the planning process, we want to understand what someone has, what they want to spend, and the timing and cost of all those things.

“We can do an insurance needs analysis, which will give you the responses to the questions that you have. Are you self insured? Or do you need insurance? There could be a period where you need some insurance. If it’s only a five-or 10-year period, maybe you just get term insurance. You know what you need to cover that gap.” – Drew Jones

Long-Term Care Insurance

The biggest insurance need that Dean has realized that people need in retirement is for long-term care. If one spouse is still healthy and the other is confined to a long-term care scenario and costs them $80,000-$100,000 a year on top of what they’re already paying for normal living expenses, that can have a huge negative impact on the healthy spouse.

In recent years, people that have long-term care insurance have seen double-digit premium increases. These long-term care companies are trying to get people to get rid of the policies.

“We think about covering those long-term care policies in a very different manner. Well before the life insurance policies with a critical care rider were available, I realized that there was only one insurance policy that a person could buy where they were guaranteed to get more out of that policy than they put into it. That’s life insurance. If there’s a fear of long-term care, a simple solution is to carry that life insurance through retirement. If you erode part of the wealth paying for long-term care, that death benefit will buoy back up the estate when you pass away and it comes in tax-free.” – Dean Barber

That was Dean’s approach before life insurance policies came with a critical care rider. The critical care rider allows you to use part of that death benefit while you’re alive to pay long-term care expenses. It’s tax-free that way too. If you have a $500,000 policy and only use $300,000 on long-term care expenses, the other $200,000 goes to your estate. That’s a reason to consider carrying life insurance into retirement. It just needs to be the right type.

8. Estate Planning

There are so many things to consider before retiring just for yourself. But you need to keep in mind that your retirement planning isn’t just about you. It’s about your spouse, children, grandchildren, etc., especially if it’s important to you to leave a legacy.

At least very least, you need to make sure that your beneficiaries are up to date. Matt Kasper joined Dean on The Guided Retirement Show earlier this spring to review family financial planning that really looked at estate planning at a high level. Make sure to check it out so you can find out how to truly leave a legacy to your loved ones rather than an unintended tricky tax situation and/or the possibility of probate.

9. Social Security

Next up on our list of things to consider before retiring is Social Security. Don’t take it at face value. You need to do a thorough analysis on it and not think that the claiming date is synonymous with the day you retire.

“It’s a much deeper conversation than that. It’s all about longevity. Obviously, if there’s any kind of prognosis or health change, that could change when you want to claim Social Security.” – Drew Jones

10. Taxes

Number 10 on our list of things to consider before retiring is taxes. Taxes during retirement are more complicated than they ever were during your working years because sources of income are taxed differently. Social Security is taxed differently than any other source of income. Your capital gains and qualified dividends are taxed differently. Your distributions from your traditional 401(k) or IRA are taxed differently. The Roth is tax-free.

And we’ve done a whole podcast on considering Required Minimum Distributions before and after retirement. Your plan does those considerations for you by staying at a certain age, if you don’t do something, this is what you’re going to need to take out. What is it going to do to you from a tax perspective and how can we fix that?

A lot of retirees’ wealth is in tax-deferred traditional 401(k)s because that’s what they had been trained to do. They’ve been taught to contribute to a traditional 401(k) because it’s going to help them tax wise now.

“When I run through that analysis piece of our planning software and show the simulation of RMDs kicking in, people see their tax rate going up. People think they’re supposed to be at a lower rate in retirement, but that’s not the case. They wish they would’ve realized 30 years ago.” – Drew Jones

The Bottom Line for Things to Consider Before Retiring

We could go into all 10 on the things we’ve listed to consider before retirement in much greater detail. The main takeaway here, though, should be that there are a lot of things to consider before retiring. There are other things we could’ve covered that just missed making our list as well.

To make sure that you’re taking the time to adequately consider all these things before retiring, you need to start doing so at least five to 10 years before retirement. And that begins by starting a conversation with a CFP® Professional.

“Preferably, that CFP® Professional will have a team of professionals in the same office that includes estate planning attorneys, CPAs, and insurance professionals that can collaborate on the client’s behalf. But none of those professionals could properly do their job until the discovery process and prioritization exercise is done. It’s the foundation of the whole plan.” – Dean Barber

Do You Have Questions About Our List of Things to Consider Before Retiring?

If you have questions about anything that Dean and Drew discussed, let us know. You can ask us your questions about things to consider before retiring during a 20-minute “ask anything” session or complimentary consultation with one of our CFP® Professionals. We can meet with you in person, virtually, or by phone.

If you feel like you need to get your ducks in a row before talking to a CFP® Professional, we have another way that you can get started with building your plan. We’re giving you the opportunity to use our industry-leading financial planning tool at no cost or obligation. It will allow you to see how all the things that we’ve mentioned will personally impact you so you can see a clearer picture of your retirement. Just click the “Start Planning” button below and you’ll be on your way.

Things to Consider Before Retiring


Then, if you do have any questions as you’re building your plan, you’re still more than welcome to schedule a meeting with one of our CFP® Professionals. We’re here to help you with figuring out how you can live your one best financial life.

Things to Consider Before Retiring with Drew Jones | Watch Guide

Introduction: 00:00
Defining Retirement: 01:33
When to Start Planning for Retirement?: 04:30
It’s About More Than Assets: 09:20
Creating a Budget: 17:24
Creating a Balance Sheet: 20:21
What About Debt?: 22:02
Savings: 26:20
Health Care: 29:18
Emergency Funds: 30:56
Life Insurance: 32:05
Social Security: 35:44
Taxes: 36:14
Conclusion: 38:00

Resources Mentioned in Podcast

Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.