Money Matters

Retire in San Diego: Your 5-Year Plan

Pre-retirees who are about five years away from retirement are at a pivotal juncture in their financial lives. You’ve already shown foresight by developing a retirement plan, and now the time has come to revisit that blueprint, especially if you plan to retire in San Diego. This stage is about fine-tuning the details, ensuring your financial strategies align with your evolving goals and the unique considerations of retiring in a sought-after destination like San Diego. We’ll discuss the financial and personal aspects you should consider that will shape this new chapter and help keep you firmly on track.

How Much Money Do You Need to Retire Comfortably in San Diego?

On the cusp of retirement, pre-retirees wonder, “Do I have enough money saved to retire and still maintain my current lifestyle?”—especially in the context of sustaining expenses for the rest of their lives, which could span 30-plus years for those in good health. 

Determining if you have enough saved to retire when you choose comes down to your expenses and income. It’s a great time to focus on your existing and anticipated spending; track your costs, if you’ll still have a mortgage in retirement, for example; and outline your goals, such as if you’d like to travel multiple times a year. Exploring how your expenses will likely change in retirement is also helpful. Here are some other questions you can evaluate:

  • Will you have children, parents, or a spouse or partner depending on you during retirement? 
  • How will you cover medical care temporarily if you’re not yet eligible for Medicare?
  • How will your tax liability change when you withdraw from your retirement accounts? 

Note that your spending will also change as you age, commonly referred to as the “go-go, slow-go, and no-go” stages of retirement. More spending typically occurs early in retirement and reduces by nearly 20 to 30 percent as you reach mid-retirement or slow down physically. However, while you may spend less on entertainment or travel, expenses could uptick again in the final years of your retirement if you require long-term care, for example (1). The length of these stages can vary and depend on your lifestyle, health, and income.

Retiring in San Diego

There are additional considerations for retirees who want to retire in San Diego, with a relatively higher cost of living—44 percent higher—than other regions. After reviewing your budget and anticipated cash flow, you may decide to downsize, refinance, relocate, or scale back on your expenses to ensure you can stay close to grandkids or elderly parents. Read more about several San Diego-specific factors. Working with a financial planner can help you further determine if your savings align with San Diego’s cost of living.

Planning for Healthcare in Retirement

Medical expenses are another aspect of comprehensive retirement planning, which includes premiums for healthcare coverage, prescriptions, out-of-pocket costs, unanticipated medical needs, and long-term care if required. To get started, assess your current health status and any ongoing medical conditions to help you anticipate potential healthcare needs and expenses in retirement.

Private Healthcare and Medicare

If you’re not yet at Medicare age, research and compare healthcare plan options, such as benefits offered by your former employer or your spouse’s plan, to ensure you and your dependents are sufficiently covered as you transition into retirement. Now is the time to also familiarize yourself with Medicare, the federal health insurance program for individuals 65 and over. Ensure you work with a professional to understand the different components of the program and what they cover so you’re well-informed when you become eligible.

Unforeseen Medical Needs and Assisted Living Costs

It’s also crucial to have a plan for unanticipated medical procedures, injuries, or a catastrophic medical event for yourself or your partner, which may require extended or long-term care. A financial advisor can walk you through different options, such as using the equity in your house or taking out a long-term care insurance policy to help cover the potentially high costs for care at home or in an assisted or senior living facility. In San Diego, annual costs for these types of facilities range from $21,000 to more than $70,000.

As you gain more clarity about possible healthcare costs in retirement, it is also a good time to adjust legal documents that will guide medical directives on your behalf and outline powers of attorney, beneficiaries, and other wishes.

How to Offset Your Retirement Expenses

As you plan for your ideal retirement and consider unanticipated or new expenses, you could determine a financial shortfall in your savings. If you don’t intend to delay your retirement, there are several ways to help offset some of these expenses, which you can discuss with a financial advisor. Some of those strategies, or a combination of solutions, may include:

  • Developing other income streams by working part time or pursuing a side gig.
  • Timing when and how much to withdraw from your accounts or claim benefits to level out your tax liability or increase your income, such as accelerating your required minimum distributions or delaying your or your spouse’s Social Security benefits. 
  • Changing your lifestyle. Many retirees hope to enter retirement and continue their existing lifestyle while enriching it with more travel, leisure activities, and entertainment. However, if your income projections don’t align with your anticipated expenses, you may have to reconsider downsizing, relocating, or cutting discretionary spending.

This brings us to the non-quantifiable aspect of retirement planning. Let’s discuss other non-financial factors you should think about as you approach retirement.

Lifestyle Planning in Retirement

It’s no secret that transitioning into retirement is a big step in reevaluating not only your finances but also your free time and purpose. Navigating the non-financial parts of retirement can require just as much planning as the financial ones. In another blog post, we discuss suggestions for how to develop structure, purpose, and community before retirement. Here are other exercises you can do today to prepare:

  • Write down your goals and what you hope to achieve in retirement, such as traveling more, spending more time with the grandkids, following a healthier lifestyle, or taking a cooking class. Don’t know where to start? While you’re still working, take two weeks off and pretend you’re retired. What will you do, who will you meet, where will you go? This will help you gain more clarity about possible associated costs and how you will fill your time.
  • Discuss your fears or concerns about entering retirement with a trusted friend or financial professional. Will it be difficult to dip into your retirement savings, even though that’s its precise purpose? Will giving up your title or authority be a challenge in your post-career life? Talk about how to confidently address these concerns so you’re ready for your new chapter. 
  • Think about how you will build community, socialize, and find purpose in retirement. For example, you may volunteer more, join a club, or return to work part time

Why the 5 Years Before You Retire Are Critical

Retirement represents when your long-term goals and financial foresight converge with practical realities, which is not just about crunching the numbers. Whether you plan to retire in San Diego or elsewhere, budget planning, income strategies, and healthcare considerations require your thoughtful attention. A financial advisor can help you navigate the factors encompassing your retirement, such as housing, social connections, leisure, and unforeseen circumstances. At CCMI, we can also help you through other financial areas of your retirement, such as:

  • Insurance planning
  • Estate planning
  • The importance of an emergency fund
  • Managing inflation
  • Creating a legacy for future generations
  • Charitable giving
  • Tax-efficient strategies
  • Managing your investments and allocations appropriately

Learn more about how we can help you prepare for your retirement, address a range of emotions you’re experiencing, and create a fulfilling, secure future.

(1):  The Prosperous Retirement: Guide to the New Reality, Michael K. Stein, CFP, 1998. pp. 16-18 (as provided by J.P. Morgan Asset Management)

PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at https://myccmi.com/important-disclosures/

CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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As a CERTIFIED FINANCIAL PLANNER™ professional, Tina guides clients in investment and financial planning to achieve their personal goals and objectives. With an extensive background working with registered investment advisors, Tina holds a wealth of knowledge in portfolio strategy, investment selection and best practices, competitive analysis, and building complex financial plans. She has also obtained her Behavioral Financial Advisor designation.

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