Retirement Planning

Preparing for retirement

Planning for retirement is a complex process requiring retirees to make difficult decisions regarding their finances, lifestyle, and cost of living. For this reason we’ve provided some advice on two of your most urgent questions to ensure that your retirement is as peaceful and straightforward as possible.

How much money is necessary to retire?

While it is a commonly accepted belief that the modern retiree will need 70 to 85 percent of their working income, there is no perfect answer. Future retirees need to realistically evaluate both the value of their current income as well as the type of retirement they are hoping to have. For instance, many view retirement as an opportunity to do all of those things they once dreamed of doing, but never had the time or the resources to do while working, such as taking expensive extended trips. When you attempt to determine what exactly the big picture looks like, costs like these need to be considered right along with your basic living costs. Also, much of the late baby-boomer generation is experiencing substantial debt. These factors should all be considered while determining just how much you will need to save for retirement.

To truly be prepared for your retirement it is necessary to look at your expenses from all angles, and to consider your personal goals carefully. You should decide when you want to retire, where you want to live during retirement, and how much you want to leave behind. Adequate preparation will require you to make tough decisions regarding spending, saving, and risk, adjusting your calculations as times, needs, and assets alter. The one thing that IS certain is that simply guessing is not a good idea.

For most, certain tradeoffs need to be made in order to achieve their financial goals. This means that you need to establish your priorities to determine whether or not you need to work longer, save more, or even take more risk in your investment portfolio to see those goals accomplished.

Close to retirement and don't have enough saved?

Although the idea of working beyond the point when you had originally planned to retire may seem unappealing to you, it has been shown that by working an extra five years, it is possible to increase your retirement income by 25 percent. Even by simply working part-time you are helping to keep a larger portion of your IRA assets growing tax-free.

Similarly, waiting to start accepting social security beyond the point when you become eligible could also be a helpful retirement strategy, as it may mean a larger pay-out. For instance, should you choose to wait until 66 instead of 62 to take social security, you could receive an annual benefit of $15,000 as opposed to $10,000. Here you have to make another decision; to decide whether the risk is worth it, or whether you should start collecting social security earlier.

For some, the peace of mind that results from knowing you will have a larger monthly income later on, when costly expenses like health care may simply become a fact of life, is simply more important than an earlier retirement. One way or another, it is necessary for you to decide what will be more important to you. Retirement may also prove to be a good time to consider moving elsewhere. For instance, the sale of a home in an area where properties values are high may translate to a very smart financial move when you find that you can afford to have a home AND extra assets in a less expensive state. Considering these sorts of decisions can prove very helpful should you not have enough tucked away when you reach retirement age.

All in all, the most important thing you can do is to face the facts, consider your financial situation, and choose a course of action that best fits your needs.