Are You Ready to Retire? Answer These Five Questions to Find Out!
Even though it may be years away, retirement will come creeping up on you before you know it. In the meantime, it is critical to prepare yourself for your golden years in every possible way. All too often, people reach retirement age before realizing that they weren't as prepared as they'd figured. Whether you're in your twenties or your sixties, there are questions that you should be asking yourself about your preparedness for retirement. By tackling these questions now, you will have a much better chance of enjoying your retirement. Five important questions that you should be asking yourself are highlighted below.
1. What Does Retirement Mean to You?
Have you ever given any serious thought about what your retirement is going to look like? Do you fully intend to travel the world? Will you settle for nothing less than living in a gorgeous resort community? Will you have a spouse along for the ride, or will you be going it alone? According to Forbes, one of the first things that you should be asking yourself is what retirement will mean for you. Without having a rough idea about how you will be spending your golden years, you can't hope to adequately prepare for them.
If you are overwhelmed by the prospect of imagining what your retirement will be like, remember that you can always change your definition over time. There is no need to nail down every last fact. You can allow yourself plenty of wiggle room so that you can modify your goals for your golden years as needed. The idea here is to simply have a basic idea about what your retirement is going to cost you. If you just come up with a number at random, you can bet your bottom dollar that you're going to come up short.
2. How Much Income will You Need in Retirement?
Once you have come up with a basic idea about what your retirement will entail, the next step is figuring out how much it will cost to maintain that lifestyle after you quit working. It may seem daunting to come up with a basic idea about what your annual income requirements will be, but there are online calculators that can help you to get the ball rolling. The rule of thumb that is usually bandied about is that your retirement income will have to be roughly 80 percent of the annual salary that you earned during your working years.
While online calculators are useful, you shouldn't rely solely on them to come up with a clear idea about how much income you will need during retirement. It pays to visit with a financial consultant from time to time to reassess the situation. If your financial consultant doesn't bring up the topic, make sure to bring it up yourself.
3. What Kinds of Income Sources will You Have?
When is the last time that you sat down and took a tally of the types of income sources that you will have during your retirement? These days, people tend to change jobs several times during their lives. As a result, there could be several different retirement savings plans and other sources of incomes in the works. You can't develop a sound retirement saving strategy without having a pretty clear idea about how much money you will be making during retirement. You also need to know where you will be getting that money.
In addition to things like Social Security and retirement accounts, there are several other possible sources of retirement income that you need to keep in mind. It is never too late to put a few more options on your plate. The more diverse your sources of retirement income are the more likely you will be to meet and even exceed all of your retirement goals.
4. How Long are You Going to Live?
Of course, no one can answer this question with any degree of real confidence. After all, anything can happen. Some folks assume that life expectancy figures are reasonable ways to guesstimate how old they can expect to live. Here's the thing: Life expectancy figures represent median ages. Half of the population will die before that age, and half of the population will live far beyond it. You can't know for sure which end of the scale you will end up on, so you need to be as conservative as possible.
The fact of the matter is that there are plenty of people out there whose retirement years exceed their working years. Nothing can throw a kink in the works of your well-laid retirement plans quite like outliving your resources. You might be able to live pretty large until age 75 or so, but what are you going to do when the money runs out? It is much smarter to plan on living to 100 than it is to plan on living to 70.
5. When are You Going to Retire?
This last question is sure to stump you. If you were born between the years 1943 and 1954 and retire at age 62, you will lose 25 percent of your potential benefits. You can avoid that by working up until age 66, which is when you will receive your maximum benefits. Different rules apply to people who were born in 1967 and after. It is important to weigh the pros and cons of retiring as soon as possible versus working until full retirement age.
Your answers to the preceding questions may change over time. The important thing is to keep them in mind and to answer them from time to time. By staying on top of these issues, you are a lot more likely to enjoy a fulfilling and stress-free retirement.
