How To Test Drive Retirement!

Mike Desepoli, Ask The Advisor

Want to Retire? Take It for a Test Drive

There are many reasons why people who could retire are hesitant to do so. Some people think they need to wait until they’re 65 or older. Some are worried about running out of money. Many parents want to keep supporting their children through some major life transition, like college, marriage, or buying a first home. 

Maybe the most common reason we see for a retirement delay is folks who just can’t imagine their lives without work. That’s understandable. A routine that’s sustained you and your family for 30 or 40 years can be a hard routine to shake. 

But retirement doesn’t have to be all or nothing right away. If just thinking about retiring makes you jittery, use these tips to ease into retirement a little at a time. 

1. Talk to your family.

Clear, open communication is an essential first step to approaching retirement. Be as honest as possible about what you’re feeling. What worries you about retirement? Does the idea excite you? What do you envision your days being like? Where do you want to live? What does your spouse want retirement life to be like? 

2. Talk to your employer.

Many companies have established programs to help longtime employees transition into retirement. You might be able to trim back your hours gradually to get an idea of what days without working will be like. You’re also going to want to double-check how any retirement benefits you may have are going to work. Discuss any large outstanding projects with your supervisor. Make a plan to finish what’s important to you so that you can leave your job feeling accomplished. 

Self-employed? Give your favorite employee (you) less hours and fewer clients! Update your succession plan and start giving the soon-to-be CEO more of your responsibilities. Make sure you have the absolute best people working for you in key leadership positions so that your company can keep prospering without your daily involvement. 

3. Make a “rough draft” of your retirement schedule. 

What are you passionate about? What are some hobbies you’d like to develop into a skilled craft? Do you want to get serious about working the kinks out of your golf swing? Are there household projects, repairs, or upgrades you want to tend to? A crazy idea you kicked around at work you’d like to build into a new company? A part-time job or volunteer position you’d like to take at an organization that’s important to you? New things you want to try? New places you want to visit? Grandkids you want to see more often?

Try filling out a calendar with some of your answers to these questions. As you start to scale back your work hours, take a few lessons or volunteer shifts. Sign up for a class. Leave town for a long weekend. See what appeals to you and what doesn’t. 

Remember, you don’t have to get your schedule right the first time! A successful retirement will involve some trial and error. Learn from things you don’t like and make a point to spend more time doing the things you do like. 

4. Review your finances. 

This is where we come in! 

Once you and your spouse have settled on a shared vision for retirement, we can help you create a financial plan to help ensure you are financially fit for (semi)-retirement. We’ll go through all of your sources of income, retirement accounts, pensions, savings, and other investments to lay out a projection of where your money is coming from and where it’s going.

We can coordinate all aspects of your situation and collaborate with you on the best course of action. You don’t have to face retirement alone and make big decisions without expert guidance. 

Coming in and talking to us about your retirement is a great “Step 1” option as well. So if you are dreaming of those days when work is optional, give us a call and we can help you through this phase of life.

For more retirement resources check out some of our other blog posts.

For more help with retirement, the AARP website can be a great resource as well.

6 Steps to Prepare Your Finances for a Mortgage


However intimidating entering–or re-entering–the housing market may feel, the benefits could be huge if you approach it in a sensible way.

Following the housing crash in 2007, recovery in the market has been uneven, with many buyers held back by stricter lending standards.

But there are signs of life. Banks are beginning to loosen minimum requirements, with several lenders now offering mortgages with down payments as low as 3 percent.

To anyone buoyed by an improving economy and considering taking the leap, I’d recommend the following steps to prepare.

1. Find a mortgage that makes sense for your financial situation.

Look closely at the fine print of the mortgage you’re applying for. Buying a home can help you build equity and qualify for tax deductions. Unlocking these benefits depends on getting a mortgage that makes financial sense for you. For instance, a fixed-rate mortgage typically gives you a higher starting rate but also the security that your monthly payments will remain the same, whereas an adjustable rate mortgage’s interest rate often starts lower but could spike sharply and leave you scrambling. If you can’t find a mortgage that suits your situation, it is best to hold off and revisit the situation at a later date.

2. Student loans aren’t a mortgage deal breaker.

According to a report from the National Association of Realtors, almost 60 percent of first-time homebuyers said that student loans delayed their saving for a down payment. Student debt is commonplace enough now that in general, lenders will view it as they do any other debt obligation. Having student debt may not prevent you from obtaining a mortgage if you have used it responsibly.

3. Reduce your debt-to-income ratio.

When considering your mortgage application, lenders often look closely at your debt-to-income ratio. For them, your monthly debt obligations mapped against your monthly income is a good indicator of how comfortably you can take on more debt. As you consider whether to buy a house, it helps to get your credit card balance down as low as possible and to examine consolidating your debts into lower monthly payments.

4. Slow down your borrowing.

Applying for a new credit card or loan initiates a hard pull on your credit report that can lower your credit score, which can then impact your eligibility for a mortgage, or the final interest rate you’re offered. If you’re thinking of applying for a mortgage, it’s best practice to hold off on applying for other new lines of credit in the six to 12 months beforehand. Too many recent credit inquiries can be a red flag, sending the message to lenders that you’re desperate for credit.

5. A little self-reflection helps.

Banks have a range of formulas and calculations that they look at when examining your mortgage application, but above all else, they’re trying to make an assessment on how well you can be trusted to pay back a loan of potentially hundreds of thousands of dollars. Lenders will review your credit history closely. How you’ve handled previous debt is the best indicator they have of how responsible you would be with future debt. Think about how reliable of a borrower you’ve been. Missed payments or accounts in collections are going to give lenders pause. You need to be on your best credit behavior.

6. Educate yourself on your credit situation.

Having a good credit score is crucial to getting a mortgage at a good rate. You may still be able to get a mortgage without good credit, but the structures and rates available to you might leave you paying more than you should. Because of how closely it will be scrutinized, you should definitely look at your credit score and report before a lender does. An FTC study in 2013 showed that as many as 25 percent of consumers have an error on their credit report that could affect their score. Your credit report will help you identify areas of improvement. For instance, credit card utilization rate–the ratio of your credit card debt to available credit–can be a major impact on your score. Something as simple as increasing your credit limit could improve your score before you apply for a mortgage.

*Article by Ken Lin

**Article first featured on Inc.com