So you’re hoping to stop working and live your life in search of soul-enriching art, society-enriching pursuits, and leisurely recreation. Then, you are in the great majority – especially if you put recreation above the first two. Now for the hard part: how are you going to afford this?
Sure, you have a 401(k) at work and a savings account, maybe some investments. The house is worth something, but is this enough? Before you can spend a lot of time as a care-free retiree, you need to spend a little time with a financial retirement calculator.
What do you need to know?
First, you need to calculate your expected financial needs. Are you planning to live a quiet life in an inexpensive community reading library books? Will you need a car? Do you want to travel? What hobbies are you planning to have? What are your health needs? How long until your retirement begins? And – don’t be squeamish – how long do you expect it to last?
Do a little research and feed those figures into your financial retirement calculator. You might get a fair picture of your financial needs. The rule of thumb is 75 to 80 percent of your income during working years. But you may be planning to live more or less extravagantly than you do now. What about your assets? If you are planning to continue living in your present home, you should have an idea of the expenses and the equity. What might the sale value be at the time of your retirement? What’s the condition of your work retirement plan? If you are paying into a plan, you should receive an annual report showing the current value and planned payouts.
Feed those figures into your financial retirement calculator and see how much more you may need to retire comfortably.
How do you prepare?
If your figures fall short, what should you do? Increase your savings, of course. Cutting back in small ways now may mean not cutting back later in more significant ways. For long term investment, stocks beat bonds.
You might want to continue working for a few years longer than you planned. The addition to your retirement account, savings and health coverage can be substantial. You don’t have to start collecting Social Security the minute you retire. Putting that off for a few years can mean larger monthly payouts. Think about working part time for a while. If you can find a job that involves your favorite hobby, it would be the best of both worlds. Studies show that being involved with people and activities is better for your health, too.
Put all these options into your financial retirement calculator and look forward to a good future.
Filed under Financial Planning.