How much do you really need to retire? This is the question that many millions of people are asking themselves as they approach the time in their lives where they might consider retiring. We wrote an extensive post about this subject back in March 2010. We felt that we should repeat some of the ideas once again this year to remind everyone that a little planning will go along way to answering this question. For the older post, click here.
Here is what you need to consider to be able to answer your question about much do you really need to retire:
- Total income during retirement
- Current Expenses
- Loan and debt payments that you may have
- Travel plans and other special expenses
- Health expenses
- Rainy day funds
- Long term expenses – new car, house maintenance, etc
- Your total savings and how quickly you want to draw down on these savings
How Much do You Really Need to Retire –
Gather Your Financial Data
This is a pretty general list, but if you gather this information and apply it to your personal situation, you will have a good start towards knowing what your financial situation will be during retirement.
Next, you need to assess what changes you may need to make based on finances. If you do not make enough income during retirement, then you are going to have to either generate more or cut somewhere. Tough choices, but it needs to be done to ensure that you and your family have the life you desire.
What Will You do during Retirement?
Next, you need to give some serious thought to what you will do with your time and how you will fill the hours. Basically, you are looking at 40 plus hours a week to fill including commuting time. You need things to do that you enjoy and will have fun at, as well as perhaps even challenging. For some people, they will need the social side as well if they are of a more social bent. Spend some time thinking about this part as well. If you are bored, chances are you will spend more money than you plan!
Discuss Your Plans with Your Family
This is the most important part actually. You have to gather your financial information together. You have thought about what you want to do during retirement. Now you need to find out if your family has the same ideas. If your spouse for example wants to travel the world and your finances indicate that this is not affordable, then some serious discussion is needed. But it is also about the small things as well, for example, hobbies, going back to work, contract work, etc
Maybe your spouse expects you to complete a number of projects around the home and this is way down your list of things to do. Discussion and compromise usually win the day and is needed for your retirement plan to work and for you to answer the question of “How much do you really need to retire”?
Get your Savings Started
Your savings can play a major part in your retirement plans in addition to pension income. Some people believe that you should not touch your savings principle but spend the income. This is definitely one scenario to consider and if the income from your savings is sufficient to top up your pension income, you are in good shape. However, with low-interest rates and markets fluctuating a great deal these days, you may have to begin drawing down on your principle. Many experts believe 4% is a reasonable number were as others believe that you can draw much faster. This really depends on your age, expected remaining years, and your tax situation as well. Lots to think about as you approach retirement.
The first step is to get started by reading articles like this one and then take the next step to collect all your information and begin planning!
Constructive comments appreciated. For more information, thoughts, and ideas about what to consider in retirement, click here.
