The reasons for retiring go beyond not having to work. In fact, many retirees continue to live extremely active lives. Some retirees even choose to work part-time. The fact is that retirement has changed over the years as more people view this period of life as a beginning, rather than an ending. Sure, you are no longer working out of the need to pay bills, but you still can have many things to do and to discover that will challenge your mental and physical desires.
A good place to begin this next chapter in your life is in the state of Rhode Island. If you are a current resident, there is not much that a retirement planning guide can tell you that you do not already know. If you are not a resident but Rhode Island has made your short list of places to retire, you will be intrigued to find as much information as possible to validate your decision.
Rhode Island Retirement Considerations
Rhode Island is the smallest state in the nation, yet it is big on culture, charm and plenty to do for its one million residents. Rhode Island is hardly an island and you will have the opportunity to experience all four seasons. The continental climate brings a hot, humid summer that sees its share of rainy days. During the summer, there is plenty of golf, hiking, camping and bicycling. The cold, snow-filled winters brings lots of enjoyment for snowboarders and skiers.
The largest industry in Rhode Island is health care services. This gives you access to quality care in whichever city that you choose to reside.
These are the general facts about Rhode Island and why it might be the best place for your retirement home. Now it is time for the practical planning that will help to ensure you can retire comfortably. Whether you are 10, 20 or 30 years from retirement, there are some basic strategies that you should consider.
Building a Retirement Portfolio
Today, many retirees are facing a double-edged sword. The advances in health care mean that most people are living longer after retirement. As a result, a retirement fund has to stretch for a longer period of time. This means that most retirees will still need some type of stock in their retirement portfolio. So, as you consider the structure of your retirement portfolio, factor in your current age and life expectancy, along with withdrawal fees, taxes and the equity to income ratio.
How Much You Will Need
In order to have a tangible starting point for how much money you will need in retirement, determine a magic number. No tricks are required – you simply want to estimate how much money is needed to maintain your standard of living. So for example if you are currently 55 with an annual income of $100,000, you may need at least $1.25 million to retire at age 65 with plans to live to 85 and not diminish your quality of life.
Savings and Investments
One way to prepare for this is to have cash reserves in money fund and certificates of deposit (CDs). These two vehicles will help to pay for near-term expenses. Generally, a good mix is to consider having 25 percent of your retirement portfolio for buying high-quality bonds. The idea is to have bonds, CDs and annuities available to pay out over a period of five to 10 years when your expenses may increase.
Since the main objective for retirement planning is to preserve funds that will last, you could diversify holdings that will not be needed immediately. Stocks, real estate and bonds can provide inflation resistant investments that can be held long-term for money that is not needed within the first 10 years. This strategy will also prevent interrupting your budget for current living expenses.
Periodically, you will want to review the mixture of vehicles in your retirement portfolio. The market, inflation and tax rules may require re-balancing your portfolio. Historically, stocks outperform bonds and you may want to change how each is spread out in your portfolio.
Increasing the amount of accessible cash in your retirement portfolio can help to guard against medical or other emergencies that require cash. Your needs will change and even the best laid out plans cannot see the unforeseeable. Therefore, adjusting from equity funds to instruments that offer short-term cash will provide more income when it is needed.
As the years progress, you should become more actively involved in managing your portfolio. This will help to reduce the fees associated with brokerage and financial management firms. You can also consider low-cost mutual funds that spread risk by grouping bonds and stocks. If you are not happy with how well (or poorly) stocks are performing, you can change the mix without having to reduce your stock ratio.
Exceeding the estimated amount of annual withdrawals can damage your prospects long-term. Keep track of your withdrawal rates once you retire. Making unrealistic estimates may lead to adjusting your retirement goals.
The Impact of Life Expectancy on Retirement Planning
The last few centuries have brought productivity increases which affect the standards of living. As a result, improvements in technology further enhance productivity by producing more output without increasing inputs. Better products, production techniques and efficient consumption are the result of technological innovations.
Having a longer life expectancy is certainly a good thing, but problems arise when you outlive your retirement income. The standard strategy when life expectancies were shorter was to gradually unload equity investments until retirement. At that time, fixed-income assets were mostly the entire retirement portfolio. There was no fear that inflation would cause a problem since retirees did not expect to live long.
Policy and economic climate changes displaced this conservative strategy. The economic cycle that began in the 1980s provided an opportunity for Americans to create retirement wealth through IRAs and 401ks. Further, the 21st century brought with it an increase in life expectancy and tradeoffs that could be devastating for retirees. The decrease in private pension systems from employers and the security from Social Security has shifted the mindset for middle-age and older people.
This decline in retirement accounts shapes how challenging it can be to plan for retirement these days. The accelerated costs of health care are also a major threat to a person’s retirement income. Deferring retirement, using private annuities and having a diversified portion of a retirement portfolio that is not annuitized can offer benefits from economic growth.
Putting Off Retirement
Most people choose to defer retirement in order to increase the number of years retirement income is available. The age for receiving Social Security benefits is 67 for anyone born in 1960 or later. This retirement age changed in order to prolong the availability of Social Security for retirees. Similarly, you can wait as late as possible to begin withdrawing retirement funds to ensure they will last until you die.
Look in to Annuities
Another way to plan for retirement based on life expectancy is to purchase an annuity. This offers a guaranteed benefit during retirement if underwritten by a private insurance company. For some people, a private annuity is less attractive because of the high cost that targets high-income people who will benefit from the annuity.
You could also annuitize a portion of your retirement fund. Ideally, this amount should be enough to cover your basic expenses. If this is done properly, the remaining amounts can be diversified that provides for an economic recovery. However, as mentioned previously, you have to be careful with your estimates. Estimating a low number could hurt you in the long-term by having less money and higher fees short-term.
Transition from an Active Wage Earner to an Active Retiree
You are not doomed to an inactive lifestyle simply because you retire. Where you decide to retire is relevant to the types of activities that interest you. Retirement is an opportunity to enjoy lifelong pursuits and to learn many new activities. For some retirees, volunteering in the community can help to define their role in life after retiring.
Another transitional concern for most retirees is dealing with a sense of loss. However, there are ways to combat these losses and at least minimize the impact. The ability to cope with a loss may increase because you feel like time is running out, limiting your opportunity to recover. The first loss that some retirees feel is a loss of productivity. Not working any more can seem empty if you have not planned for activities that can keep you productive.
The additional time available to you after retiring provides opportunities for volunteering and enjoying the familial role as a grandparent, if applicable. The skills and knowledge that you developed during your career can be an asset during retirement. If you were a professional accountant, you can volunteer with a nonprofit and provide financial management assistance that will help to keep needed services available for the community. You can also enroll in courses and learn new things, which will keep your mind fresh.
Losing a spouse can have the greatest impact because you do not have the companionship and love that has been with you over the years. This can also be the hardest to anticipate unless your spouse is diagnosed with a terminal illness. Still, preparing to lose someone we love is not an easy task. Perhaps focusing on having a sense of independence and self-reliance can minimize the impact, but will never replace the one you love.
Besides concerns about being financially secure and having adequate health care coverage, some retirees worry about isolation and a lack of social support for their emotional and physical well-being. This requires planning for a social network in your retirement years so this does not become a large concern.
All of the concerns you have about retirement are interrelated. With a sound financial plan, you can buy health care insurance and a decent home. You can also move to an area that will provide the emotional and physical supports to keep you active.
You are continuing your middle-age lifestyle in retirement, but with more freedom and flexibility that you might not have had while working. Therefore, you want to have a retirement plan that includes ways to develop social and economic skills. While you may not be able to anticipate everything, a plan will provide a good foundation for what you can expect.
A good network of family members, friends and perhaps colleagues from your profession can add to a thriving retirement life in Rhode Island or elsewhere.
Cities in Rhode Island to Consider for Retirement
The fact that Rhode Island is the smallest state in the country does not mean that it is limited on activities that will add to your quality of life during retirement. Many of the cities have a small town atmosphere with big city culture. You will have plenty of opportunities to learn a new hobby, improve your golf game, expand your intellectual horizons or simply relax.
There are five towns in Rhode Island that offer the best health care, culture, green space for outdoor enjoyment and low taxes: Cranston, East Providence, Pawtucket, Providence and Warwick.
Cranston
As part of metropolitan Providence, Cranston has a better than average rating on the quality of life to enjoy during your retirement years. Noted as one of the best places to retire in 2008 by U.S. News & World Report, you will experience all four seasons while taking part in museums, golf courses, health clubs and libraries. The population of nearly 81,000 has access to 37 hospitals, nearly 70 clinics and over 100 elder care facilities.
East Providence
There are plenty of hospitals and doctors in East Providence for its nearly 51,000 residents. You will also have access to golf courses, museums and movie theaters. In 2006, East Providence was voted one of the best places to retire by Money Magazine; in 2008, it also made the list at U.S. News and World Report.
The outdoor recreational activities are sure to keep you busy. You can go fishing and hiking at John Lewis Park, which sits along the waterfront. From there, you have endless views of India Point and the Seekonk River. You can also enjoy health clubs and live shows year round live shows at the East Providence Community Theater.
Pawtucket
Pawtucket has a population of less than 75,000 residents. The average high temperature during the summer is 82 degrees, providing gorgeous weather to enjoy outdoor activities. There is an abundance of hospitals and health care facilities to ensure you will have adequate access to health care when needed.
Providence
As the capital of Rhode Island, Providence has the highest population with well over 183,000 residents who call this beautiful city home.
Major manufacturing in Providence has declined from the metals and textiles industries that fueled its economy. However, jewelry and silverware manufacturing still exists in this thriving economy.
A wealth of activities awaits a retiree with a 1,200 acre park system, museums, botanical center and zoo. Additionally, a number of well-known institutions of higher education are located in Providence: Brown University, Johnson 7 Wales, and the University of Rhode Island.
Warwick
With a population of approximately 87,000 people, Warwick was also once a textile town. Located just south of Providence, Warwick offers plenty of cultural attractions for tourists and residents alike.
You can tour the historic village centers in Warwick that have names of the native people of the area such as Pawtuxet, Potowomut and Apponaug. For people who live around Narragansett Bay, there is plenty of boating and other aquatic sports in which to indulge.
Recreation is not the feature of Warwick to consider for retirement. You will have access to seven hospitals and 12 clinics to meet your health care needs.
Retirement Planners in Rhode Island
As you begin your retirement planning, you might find that help from a trusted, certified advisor can provide some alternatives that you might not have considered. Below is a brief list of some of the retirement planners in Rhode Island that provide retirement planning and other financial services.
- Blue Fin Capital – located in Providence, this firm offers financial wealth building services along with retirement planning.
- Arlen Corporation – in Warwick. This firm works with individuals, couples and corporations to provide financial services and retirement plans.
- Coastal Financial Planning, Inc. – office is located in Lincoln. Provides comprehensive financial planning, investment management and tax services
- Lepine Financial Advisors, Inc. – located in Cumberland and provides investment services along with retirement planning.
- Strategic Financial Group in Cranston has asset management, estate and tax planning in addition to offering retirement planning.